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Company payment to employee benefit trust and subsequent loan did not constitute earnings of director and shareholder

By Mark McLaughlin, June 2026

The Court of Appeal upheld the Upper Tribunal’s decision that the First-tier Tribunal erred in law in deciding that a payment of earnings had arisen from arrangements involving the taxpayer company making a payment to an employee benefit trust, which then loaned the same amount to a director and shareholder. 

Summary 

The Court of Appeal upheld the Upper Tribunal’s (UT’s) decision that the First-tier Tribunal (FTT) erred in law in deciding that a payment of earnings had arisen from arrangements involving the taxpayer company making a payment to an employee benefit trust (EBT), which then loaned the same amount to a director and shareholder. 

Background 

A director and shareholder (MC) of the taxpayer company (MRC) established a sole trader business in the early 1980s, which&nbsp

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