John Lowry v The Commissioners for HMRC

Facts

Mr John Lowry is an independent turnaround and restructuring specialist who has provided his services to public and private companies and government funded enterprises. Prior to 2011 he operated through a partnership, then incorporated Eclecsys Limited (EL), through which his services were supplied to end-clients. From September 2010 he briefly participated in the "Hamilton scheme" and, from 21 April 2011, in the "K2 Scheme" developed by EDF Tax LLP and marketed by Peak Performance Tax Ltd, having been introduced to the predecessor scheme by his accountant Mr Cormac Marum of Harwood Hutton Tax Advisory LLP. Under the arrangements he became an employee of successive Jersey-resident persons or trusts, which supplied his services through intermediaries to EL and on to end-clients. His employer paid him a salary of approximately the national minimum wage plus interest-free "loans" advanced at its discretion, the right to repayment of which was assigned very shortly afterwards to an offshore Employer Financed Retirement Benefits Scheme of which he and his relatives were beneficiaries. He received "loans" totalling £1,047,362.76, and retained roughly 82% of the sums invoiced for his services. HMRC issued three closure notices on 15 December 2016 amending his self-assessments for 2011/12, 2012/13 and 2013/14, charging additional tax of £316,908.40, £183,724.40 and £89,259.55 respectively, on the footing that the sums were earnings under section 62 of the Income Tax (Earnings and Pensions) Act 2003 and/or employment income under Part 7A of the Income Tax (Earnings and Pensions) Act 2003. He appealed to the First-tier Tribunal.