On 5 October 2015, the Upper Tribunal held11 that certain tax avoidance schemes, designed to avoid income tax and national insurance contributions, failed. The schemes involved employees giving up salary in return for dividend payments in approximately the same amounts.

The Tribunal, following the Court of Appeal decision in HMRC v PA Holdings Ltd12, applied a test of substance over form to hold that the dividends received in fact represented emoluments of the recipients’ employment with their employer (rather than amounts properly taxable as dividends).

Anti-avoidance provisions (for example the disguised remuneration rules and section 431B ITEPA 2003) now aim to prevent this type of tax planning.

The decision can be found here.