ARTICLE · 25 JULY 2005

Independent Advice to Trustees - DEXTRA and EBTs

Pinsent Masons

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The House of Lords has found in favour of HM Revenue - upholding the Court of Appeal decision in the Dextra case that payments to the employee benefit trust (EBT) in question were not deductible for corporation tax purposes unless and until the EBT applied them in paying emoluments: MacDonald v Dextra Accessories Limited.

United KingdomTax

Janet Hoskin

Lisa Parisi

Originally published July 2005

The House of Lords has found in favour of HM Revenue - upholding the Court of Appeal decision in the Dextra case that payments to the employee benefit trust (EBT) in question were not deductible for corporation tax purposes unless and until the EBT applied them in paying emoluments: MacDonald v Dextra Accessories Limited

The planning which is the subject of this case sought to obtain a corporation tax deduction when a contribution was made to an EBT, but to delay the tax any individual would have to pay in respect of this contribution indefinitely, whilst still allowing the individual to receive some benefits.

HM Revenue argued that Section 43 Finance Act 1989 prevented this planning by delaying a deduction where, broadly, ‘the emoluments are not paid before the end of the period of nine months beginning with the end of that period of account’. To determine whether this provision applied to the particular planning it was necessary to consider the

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