Caudwell Group takes appeal to Lords

Link: Phone group to take bonus scheme to Lords

This is the latest move in a long-running legal battle following a Court of Appeal ruling in favour of the Inland Revenue.

The group’s legal action began in 2002 when contributions to EBTs were ruled non-deductible against corporation tax. Having taken extensive legal advice, the group has tried to protect the scheme it has used for the past six years to motivate its workforce.

John Caudwell, chairman and chief executive of the group, said the rule was ‘desperately disappointing’ and that the ‘decision to escalate this matter had not been taken lightly’.

Caudwell, said: ‘The Court of Appeal ruling eliminates the possibility of extending the scheme to the rest of the workforce.

‘Wealth creation is a key to the group philosophy and the EBT has motivated employees to contribute and participate in the success of the group.

‘While this case is ongoing, we are seriously having to consider alternative wealth creation schemes,’ added Caudwell.

Although chancellor Gordon Brown closed the loophole in November 2002, if the Inland Revenue prevails it could cause a ripple effect and issue tax bills to scores of institutions with similar structures.

The group set up an employee benefit trust in December 1998 under the advice of Ernst & Young. It is now believed to hold more than £20m, and has 117 members.