The FTT decided that in both cases the arrangements had been designed to disguise income that should have brought tax and National Insurance contributions.
HMRC had argued that the arrangements should come under disclosure of tax avoidance schemes (DOTAS), which the FTT agreed with in a hearing.
Disguised remuneration (DR) payments often involve a small part of their earnings in a taxable element, and the rest in loans. The loan is often routed through an offshore trust in a low or no tax jurisdiction.
In practice, the loan terms mean that they are never repaid. However, HMRC makes clear that “the amounts paid by way of a loan are no different to normal income and are – and have always been – taxable”.
HMRC reiterated a warning to scheme promoters that they should carefully consider DOTAS rules when they market their arrangements, to see whether they should be declared to the Revenue.
It will now examine whether DOTAS should apply to individual cases.
In the Hyrax case, the FTT said, “There is no other rational reason for why anyone would implement a convoluted and expensive set of arrangements which left them with a legal (if economically unreal) obligation to repay a sum that they would otherwise have received as salary, save for the expected tax advantage.”
Similarly, it took the view that Curzon Capital had “no corresponding non-tax benefits against which that saving should be weighed”.
“It was self-evidently the case that the tax saving was the main benefit that might be expected to arise from the arrangements”, the FTT added.
This comes after HMRC won a £40m tax avoidance case against Hyrax, earlier this year.