Reviewing Aberdeen Asset Management v HMRC

The First-tier Tribunal’s decision in Aberdeen Asset Management v HMRC [2010] UKFTT 524 (TC) marks another victory in HMRC’s battle against tax avoidance schemes and illustrates one Tribunal’s blunt approach in applying the dictum of Ribeiro PJ in Arrowtown (Collector of Stamp Revenue v Arrowtown Assets Ltd [2003] HKCFA 46 at para 35).

The facts

Aberdeen established an offshore employee benefits trust (EBT) and transferred funds to it. For each relevant employee an offshore company (Offco) was established with £2 of share capital. The EBT subscribed for one share for £1 and for the other at a substantial premium.

The EBT set up a family benefits trust (FBT) for each employee. Each Offco then increased its authorised share capital and granted the corresponding FBT an option to subscribe for the unissued shares thus diluting the value of the existing shares in each Offco. One or both of those...