On 25 May 2017, the First-tier Tribunal5 held that members of a group of companies could not claim credit for corporation tax paid (on the assumption that a failed tax avoidance scheme would work) against PAYE and national insurance contributions (NICs) liabilities of another group member that arose on failure of the scheme.

The Upper Tribunal had already decided (in 2015) that the scheme, whereby employees gave up part of their salary in return for dividends, had failed. See here for our earlier commentary on the Upper Tribunal decision.

The issue before the First-tier Tribunal in the present case was whether corporation tax paid under self-assessment by the appellants, acting on the basis that the avoidance arrangements had their intended consequences, could be credited against the PAYE and NICs liabilities that the Upper Tribunal had in 2015 rules arose on failure of the scheme.

The Tribunal had little sympathy that the group was, in effect, being taxed twice as a result of the failure of the avoidance scheme. Quoting an unrelated decision of the Court of Appeal6 ; “it does not seem to us that they can legitimately complain if the scheme fails in its purpose and instead results in their paying tax twice.”

The decision can be viewed here