Overview

In the case of HMRC -v- PA Holdings, the company entered into arrangements under which it was intended to ‘re-route’ employee bonuses as dividends of a UK resident company, Ellastone, so that they would be taxed as dividend income. The First-tier Tribunal found that the payments were both earnings and distributions.
On appeal from both parties, the Upper Tribunal considered that there were essentially three questions to be answered:
1. Were the dividends to be regarded as coming from the employees' employment?
2. Did the payments constitute dividends or ‘other distributions’?
3. If the answer to both the above questions was yes, how did the legislative provisions interact?


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