HMRC were criticised for their handling of a recent employee share scheme case by the tribunal judge, who noted that they had conducted their investigation “without apparently troubling to look at the scheme rules”. The recent case is not the first time tribunal judges have been critical of HMRC’s conduct.
The case in question involved an employee share option scheme. The taxpayer exercised his share options in October 2007, paying £7,636 for shares worth £111,579. The scheme rules stated that the taxpayer should pay over the PAYE due on the exercise within 90 days, but he was not told the amount to pay by his employers until March 2008.
HMRC charged tax on under ITEPA 2003, s.222 on the basis that this was not within the 90 day limit imposed by the scheme rules. The taxpayer appealed as he could not have paid the PAYE before being told the amount to pay.
The tribunal allowed the appeal, agreeing with the taxpayer that the date of exercise could not be the relevant date as he was not informed of the amount to pay until March 2008.
The tribunal judge stated that s.222 was introduced to target grossly abusive schemes and that there was nothing abusive about this scheme. The case again shows that it often pays to challenge HMRC, especially when they are being over-zealous in their application of the law.