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Tax adviser’s trust scheme blocked

A tax avoidance scheme which routed profits of a tax advisory business through employee benefit trusts has been closed by a tribunal.

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The scheme was operated by tax advisor John Dryburgh. The Tribunal said:

There is no doubt that Mr Dryburghnot only lied to the Tribunal in a material way, but he appeared also to have fabricated evidence, forged documents and thrown away a memory stick in order to destroy evidence.

HM Revenue and Customs (HMRC) challenged tax deductions of almost £9 million which Mr Dryburgh’s companies, Scotts Atlantic Management Ltd and Scotts Film Management Ltd, paid into Employee Benefit Trusts. The payments came out of profits earned by selling tax avoidance film schemes. The tribunal decision, which denied the claimed deduction, has protected £2.4 million of tax.

Although Mr Dryburgh is in bankruptcy and Scotts Atlantic Management is in liquidation, HMRC believes that the cash can be recovered.

The Exchequer Secretary to the Treasury, David Gauke, said:

This scheme – like so many others – was not worth buying into. The Government has made almost £1 billion available to HMRC to tackle the issues of avoidance and evasion and to ensure that the minority who try to avoid their responsibilities pay the tax due.

HMRC will always challenge this type of planning and the tribunal decision should send a clear message to anyone thinking they can get away with tax dodging – HMRC will pursue you and you will have to pay the tax due as well as interest, on top of the promoter’s fees.

The tax avoidance involved trying to extract profits from companies while at the same time securing corporation tax deductions. Employers paid money into an Employee Benefit Trust (EBT) and claimed corporation tax deductions. The EBT gave undervalued shares in a new company, causing a loss to the employer.

The case was listed as Scotts Atlantic Management Limited (in members’ voluntary liquidation), Scotts Film Management Limited and John Dryburgh (in bankruptcy) v CRC [2013] UKFTT 299 (TC).

HMRC has protected over £1 billion since the beginning of the year in a series of successful challenges to tax avoidance schemes at the First Tier Tribunal and Supreme Court:

Published 11 June 2013
Last updated 14 August 2014 + show all updates
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