Terra Firma Chambers' Philip Simpson QC has successfully acted for the taxpayers in the case of Macleod and Mitchell Contractors Limited v HMRC [2019] UKUT 46 (TCC).

The case concerned keyman insurance policies that were to be taken out for the benefit of the taxpayer company on the life of its director. By mistake, the policies were taken out naming the director as the beneficiary. The company paid regular premiums for a number of years, without anyone realising the mistake. During an enquiry, HMRC spotted the error, and claimed income tax and national insurance contributions on the basis that the premiums had been due by the director, and the fact that the company had paid the premiums counted as earnings for the director. This was said to be because debts due by the director had been paid off.

The Upper Tribunal held that neither income tax nor NICs were due. This was because any benefit was not ‘from’ the director’s employment, but arose instead from a mistake. There had been no intention to reward the director for his services by paying the premiums. The taxpayers’ appeals were thus allowed.

The decision may be found here: http://www.bailii.org/uk/cases/UKUT/TCC/2019/46.html .