Lee Sharpe looks at a recent case regarding tax and accounting principles and warns that, while welcome overall, the decisions in it were not entirely helpful.
HMRC has received a sound, repeated and unanimous thrashing at the courts over fundamental principles underpinning the taxation of profits. While involving share options through an employee benefit trust (EBT), this article covers the wider aspects of a case involving accounting adjustments.
Setting the scene
The taxpayer company was part of a group, operating as the employer on behalf of other group members. The taxpayer company then re-charged its costs, with a mark-up, to the other group companies. This is quite a common scenario for larger corporate groups.
The taxpayer company operated a share reward scheme for group employees; again, not unusual. International Financial Reporting Standards (IFRS
