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Bonuses structured as dividends are taxable as employment income

09 December 2011

The Court of Appeal has ruled that bonuses that were structured as dividends in an attempt at tax avoidance were taxable only under Schedule E of the income tax provisions, as employment income, and not under Schedule F, as dividends. ICTA 1988 is now largely repealed, but the judgment could be relevant to the rewritten income tax legislation. However, the scope to use the priority of dividend charges in tax planning is now much reduced by other provisions. (HM Revenue and Customs v PA Holdings Ltd [2011] EWCA Civ 1414.)