KPMG scheme advised paying directors with debt

The details of the firm’s advice to businesses was revealed this month as a
case disputing the efficacy of the scheme KPMG was selling came before the
Special Commissioners of HM Revenue & Customs.

KPMG sold the scheme to IT company Spectrum Computer Supplies and timber
merchants Kirkstall Timber in the mid-1990s.

It allowed directors to avoid NI and PAYE taxes by receiving company book
debts instead of cash when bonuses were paid.

Special commissioners John F Avery Jones and Adrian Shipwright said that both
appeals rested on whether the assignment and collection of book debts on behalf
of the directors qualified as trading arrangements or a standard payment to the

Timothy Brennan QC, who was instructed by McGrigors for Spectrum and
Kirkstall, argued that because the arrangements to collect the book debts were
already in place within the credit control structures of the companies, the
debts would still have been collected even if they had not been assigned to the

The special commissioners, however, concluded that the assignment of the
debts amounted to payments and did not qualify as trading arrangements.

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