EDI Services Limited & Others v Her Majesty's Revenue & Customs

Facts

HMRC and the accountants Grant Thornton were aware of some 200 cases in which employer companies had used the same arrangements to remunerate directors and employees: antique gold coins located offshore were purchased by the employer from the same UK broker, transferred to the relevant directors or employees by deed of transfer, and then, after a short interval, resold by them to the broker for cash. The apparent object was to bring the bonuses within the exemption for payments in kind in regulation 19(1)(d) of the Social Security (Contributions) Regulations 1979 and so avoid Class I National Insurance Contributions. HMRC's stated contentions were that the Ramsay approach characterised the arrangements as a payment of money rather than in kind, and that in any event the exemption was removed by paragraph 9C of Schedule 1A to the 1979 Regulations because trading arrangements existed for the coins within section 203K(2)(a) ICTA 1988. Open appeals stood against decisions on liability under section 8(1)(c) of the Social Security Contributions (Transfer of Functions, etc) Act 1999, some before the Special Commissioners and some still before General Commissioners. After several years of correspondence and negotiation, both sides wished a lead case to be determined as soon as possible, and applied to the Presiding Special Commissioner for lead case directions — the first application of its kind under regulation 7A of the Special Commissioners (Jurisdiction and Procedure) Regulations 1994.