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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Tullett & Tokyo Forex International Ltd & Ors v Secretary Of State For Social Security [2000] EWHC Admin 350 (25 May 2000)
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Cite as: [2000] EWHC Admin 350
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TULLETT and TOKYO FOREX INTERNATIONAL LTD SGW LTD BARCLAYS DE ZOETE WEDD SERVICES LTD V SECRETARY OF STATE FOR SOCIAL SECURITY [2000] EWHC Admin 350 (25th May, 2000)


Case No: CO/2038/1999
CO/2039/1999
CO/2040/1999

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
CROWN OFFICE
ROYAL COURTS OF JUSTICE
STRAND, LONDON, WC2A 2LL
Thursday 25 May 2000

BE F O R E :
THE HON. MR JUSTICE COLLINS


-------------------------------------

TULLETT & TOKYO FOREX INTERNATIONAL LTD




SGW LTD



BARCLAYS DE ZOETE WEDD SERVICES LTD



V

SECRETARY OF STATE FOR SOCIAL SECURITY


__________________________________
(TRANSCRIPT OF THE HANDED DOWN JUDGMENT OF
SMITH BERNAL REPORTING LIMITED, 180 FLEET STREET
LONDON EC4A 2HD
TEL NO: 0171 421 4040, FAX NO: 0171 831 8838
OFFICIAL SHORTHAND WRITERS TO THE COURT)
__________________________________


MR JOHN GARDINER Q.C.


FOR THE APPELLANTS

MR DAVID EWART


MR LAUNCELOT HENDERSON Q.C.

FOR THE RESPONDENT

MR CHRISTOPHER TIDMARSH


__________________________________
JUDGMENT
AS APPROVED BY THE COURT
CROWN COPYRIGHT ©

MR JUSTICE COLLINS:
1. Each of these three appeals by case stated under s.18(3) of the Social Security Administration Act 1992 raises the same issue and there are no material differences of fact in any of them. In those circumstances, they have been heard together. Counsel on each side have based their submissions upon the facts of one of them as representative of them all and I have not been required to consider the detailed circumstances of any of them. Indeed, counsel accepted that in explaining my decision I should as they have done set out the scheme which has led to the dispute in general terms rather than detailing the facts of the individual appeals.
2. The issue is whether in the circumstances Class 1 Contributions are payable by the appellants as employers or secondary contributors on very substantial sums which represent bonuses provided to employees. I was told that something in the order of £350 million is at stake in these and other cases in which the same sort of scheme has been used. The route by which these appeals reach me is set out in ss. 17 and 18 of the Social Security Administration Act 1992. S.17(1)(b) requires that any question relating to a person's contributions is to be determined by the Secretary of State who may, by s.17(4), appoint a person to hold an inquiry and report to him. Such an inquiry was held in these cases in January 1997 and the person appointed (Mr. R.K. Miller C.B., a former solicitor of Inland Revenue and a part-time chairman of VAT Tribunals) reported on 10 August 1997. The Secretary of State reached his decisions in December 1997 and provided detailed statements of the grounds for them pursuant to Regulation 15(2) of the Social Security (Adjudication) Regulations 1995 on 21 May 1998. In accordance with the provisions of RSC O.111 r.2, the Secretary of State was required to and did state cases setting out the facts upon which his decision was based and his decision. This he did. In each appeal the case stated is dated 20 April 1999. Notices of Appeal to this court were lodged on 21 May 1999 and these appeals now come before me pursuant to RSC 0.111 r.1. S.18(6) of the Social Security Administration Act 1992 provides:
"Notwithstanding anything in any Act, the decision of the court on a reference or appeal under this section shall be final".
That is perhaps an unfortunate provision since the point to be decided, as Mr. Henderson Q.C. indicated, is one with which no court has hitherto had to grapple and a very large sum of money depends upon my decision. Furthermore, the point is not by any means an easy one to determine. However, Parliament has decreed that there should be no further appeal and so it falls to me to make a final disposal.
3. The scheme used by each of the appellants can be summarised by reference to the most helpful skeleton arguments lodged by both counsel. It was designed to enable bonuses to be received by employees in a way which avoided the need for the employers to deduct tax and which also avoided the payment by the employers of Class 1 Contributions under the Social Security and Benefits Act 1992 (hereafter referred to as the 1992 Act). The question I have to determine is whether the scheme has achieved the second of those objects by exploiting what Mr. Gardiner, Q.C. has accepted may be regarded as a loophole in the legislation. I gather it has achieved the first, but that does not of course mean that tax will not be paid. It will, but by the employees at a later time. But if the scheme has achieved the second object, the payment of national insurance contributions is avoided altogether.
4. None of the employers was bound to pay bonuses in any particular amount or at all. But it was no doubt anticipated by the relevant employees, who were usually the more senior and the better remunerated, that bonuses would be paid. The method by which such payment was achieved was through life policies taken out by the employers (or in one case trustees on their behalf) on the employees' lives. In the SGW case the case stated records in Paragraph 3(48):-
"The basis for these arrangements was the provision to highly paid employees of a means of securing their future against the possibility of their leaving employment before normal retiring age, something which was a real possibility because of the pace of change in their ways of working taking place after 1986. It was easier to administer than alternative methods, for example, setting up an unapproved pension scheme. Employees were given policies as an encouragement to gain for their future and some did respond".
In the other two cases, it is recorded that the recipients were expected to surrender the policies immediately and receive the benefit in cash, but that they could at their discretion retain the policies if they chose to do so. In the Tullett appeal, it is stated (paragraph 3(50) that `realistically the arrangements were just a way of paying bonuses in a way which was beneficial'.
5. The scheme operates in the following stages:-
(1). The employer takes out a number of life policies of small value (a premium in the order of £100 being normal) on the lives of the employees to whom bonuses may be given with an insurance company, Albany Life Assurance Company Ltd. (`the insurers'). Additional premiums can be paid at any time. Each policy is owned both legally and beneficially by the employers and I am not concerned whether there was an insurable interest. The employers were advised that there was, but, even if that was wrong, the insurers were never going to take the point. The policies themselves provided for the usual benefits of such a policy including a surrender power on the request of the policyholder. The benefits payable at any time were to be calculated by reference to funds and units, but, as Clause 9(f) of the policies (which were in standard forms) made clear, the references to units and funds were made purely for the purpose of calculating the benefits conferred and "neither the policyholder nor any other person entitled to benefit shall have any legal or beneficial interest in the units or funds or any underlying assets which are solely the property of the [insurers]". Thus the policyholder simply has a contractual right as against the insurers.
(2). The employer executes a standard form declaration that it holds such of the policies as are mentioned in the declaration on trust for particular named employees as beneficiaries. Those are the employees who are to receive bonuses and they then became beneficial but not legal owners of the policy or policies concerned. At that stage, the policies are of very low value. As will be seen in due course, it is accepted that the conferment of the beneficial interest in the policy on the employee carries an obligation to pay Class 1 Contributions.
(3). The employer buys a short-dated gilt (no doubt because it is unlikely to fluctuate significantly over a short period of time) of a value sufficient to cover the bonuses which are to be paid. The gilt is owned by the employer.
(4). The gilt (or a sufficient part of it) is transferred to the insurers. The insurers also receive a schedule from the employer which identifies the amount of premium to be added to the policies relating to the various employees and the insurers act accordingly. The effect of this transaction is to transfer the legal and beneficial interest in the gilt to the insurers and to increase according to the amount of premium allocated to it the value to the beneficiary of each life policy.
(5). The employer executes a deed of assignment in standard form assigning legal ownership of the policies to each of the employees concerned and the insurers are notified accordingly. Thus the employee can keep the policy or can exercise any of the rights under it, in particular the right of surrender. The employer sends to each employee a letter informing him or her that the surrender value will depend on the value of the units allocated on the date of surrender. The recipients will be aware of the likely amount since, as I have already said, the value of the gilt would be unlikely to fluctuate significantly in the short time before any surrender option was exercised if the employee wants his or her bonus in cash. The letter also points out that the employer had been advised that the value of the premiums would be treated as a benefit in kind for income tax purposes and so would not be subject to deduction of tax at source.
(6). The employee usually, but not always, decides to surrender the policy or policies with immediate effect whereupon the insurers pay the surrender value in cash having sold the gilt (or a sufficient part of it) to place themselves in funds.
6. The transactions with which I am concerned took place in the tax years 1992/3, 1993/4 and 1994/5. If there is a loophole, it has since been closed. They were carried out over a very short period of time (in the BZW case less than 10 days) and covered a substantial number of employees. But I have not had placed before me any arguments based on the principle derived from Ramsay v IRC [1982] AC 300. I must therefore decide these cases giving full effect to the legal consequences of the scheme involved.
7. I must now refer to the relevant legislative provisions. Class 1 National Insurance Contributions are earnings related and are payable from employed earners and from employers or other persons paying earnings (1992 Act s.1(2)(a)). The former are designated primary, the latter secondary. Since there is a cap on primary contributions, in reality these cases are likely to concern only secondary contributions which are payable by the employers. `Employed earner' is defined in s.2(1)(a) of the 1992 Act in these words: -
"`employed earner' means a person who is gainfully employed in Great Britain either under a contract of service, or in an office (including elective office) with emoluments chargeable to income tax under Schedule E".
8. It is convenient at this point to deal with an argument put by Mr. Gardiner, Q.C. that s.2(1)(a) on its true construction supports his submission that the approach of the courts in tax cases should be imported into the National Insurance legislation. He submits that the words "with emoluments ....... Schedule E" govern both the forms of employment referred to in s.2(1)(a). Mr. Henderson submits that the relevant words govern only employment in an office and are needed because office holders may not receive any emoluments notwithstanding that their employment can properly be described as gainful. That Mr. Henderson's construction is correct is in my judgment put beyond doubt by s.7 of the 1992 Act which identifies who is to be regarded as the relevant secondary contributor and reads, so far as material:-
`.... the `secondary contributor' in relation to any payment of earnings to or for the benefit of an employed earner, is -
(a) in the case of an earner employed under a contract of service, his employer;
(b) in the case of an earner employed in an office with emoluments ...."
This form of words is wholly inconsistent with Mr Gardiner's submission.
9. I return to the legislation. `Earnings' are defined in s.3(1) in these words:-
(a) `earnings' includes any remuneration or profit derived from an employment; and
(b) `earner' shall be construed accordingly".
S.3 goes on to enable (s.3(2)) the amount of a person's earnings to be treated as comprised in any payment made to him or for his benefit to be calculated or estimated in such manner and on such basis as may be prescribed. Further, regulations may prescribe that particular sorts of payments may be disregarded or deducted from earnings (s.3(3)). The crucial section for the purposes of these appeals is s.6(1). This reads:-
"Where in any tax week earnings are paid to or for the benefit of an earner in respect of any one employment of his which is employed earner's employment .... a primary and a secondary Class 1 contribution shall be payable....."
The key words are those I have underlined. To anticipate the arguments, the appellants submit that the gilts were not earnings paid for the benefit of the employee but represented the cost to the employer of providing what was properly to be regarded as earnings, namely the life policy whose value was enhanced. This was a payment in kind. Mr. Henderson submits that the words `for the benefit of' show that payments of earnings need not be made to the employee direct and the payments of the gilts to the insurers was manifestly made for the benefit of the employees who were thereby able to receive the value of the premiums.
10. The Social Security (Contributions) Regulations 1979 (S.I. 1979/591), as amended, cover many of the matters which the 1992 Act leaves to be prescribed. They include payments which are to be disregarded pursuant to the power conferred by s.3(3). Regulation 19 so far as material provides:-
"19(1). For the purposes of earnings-related contributions, there shall be excluded from the computation of a person's earnings in respect of any employed earner's employment any payment in so far as it is .....
(d) subject to Paragraph (5) of this regulation, any payment in kind .... or by way of the provision of board or lodging or of services or other facilities".
Broadly speaking, therefore, payments in kind are not to be taken into account. However, Paragraph (5) provides substantial exceptions to the principle. It reads:-
"Payments under (1)(d) of this regulation shall not include any payment by way of the conferment of any beneficial interest in:-
(a) any asset falling within Schedule 1A to these regulations; or
(b) any contract the effecting and carrying out of which constitutes long term business falling within Class 1 (life and annuity business), Class III (liked long term business) or Class VI (capital redemption business) specified in Schedule 1 to the Insurance Companies Act 1982".
Schedule 1A includes as assets by Paragraph 3:-
`Loan stock, bonds and other instruments creating or acknowledging indebtedness issued by or on behalf of a government, local authority or public authority'.
The provisions of Paragraph 19(5)(b) led to the inclusion of the conferment of the beneficial interest in the policies on the employees referred to in Paragraph 5(2) of this judgment in the payments upon which contributions had to be made. At that time, the value was very small indeed. There has been no subsequent conferment of beneficial interest in the policies on the employees.
11. Thus the only way by which contributions could be payable would be if the transfer of the gilts fell within Regulation 19(5)(a) and was a payment `for the benefit of the employee' within the meaning of s.6(1) of the 1992 Act.
12. The only other regulation I need refer to is 18(2) which deals with calculation of earnings. This reads so far as material:-
"..... the amount of earnings which is comprised in any payment by way of the conferment of any beneficial interest in any asset specified in Schedule 1A to these Regulations and which falls to be taken into account in the computation of a person's earnings, shall, for the purposes of earnings-related contributions, be calculated or estimated at a price which that beneficial interest might reasonably be expected to fetch if sold in the open market on the day on which it is conferred".
This approach is consistent with that applied in revenue law to assessment of emoluments for the purposes of income tax chargeable on payments in kind, namely that they should be valued on the basis of what they are worth to the recipient.
13. The Secretary of State relied in the cases stated on two alternative grounds for concluding that contributions were payable. The first I have already identified. The payment to the insurers of the gilts conferred the beneficial interest in them on the insurers and, although it was a payment in kind, it was caught by Regulation 19(5)(a) of and Paragraph 3 of Schedule 1A to the Contributions Regulations. The wording of Regulation 19(5) was wide enough to cover the conferment of a beneficial interest on a third party for the benefit of the employee and this was what had happened. The alternative ground was that the employees had not in reality received a payment in kind but the cash payment represented by the enhanced value of the policy in question. The enhancement was equivalent to and should be regarded as a payment in cash or money's worth.
14. The alternative argument has been abandoned and was not relied on before me by Mr. Henderson. He accepted that the employees received a payment in kind in the form of the life policy or policies with an enhanced value. This concession seems to me to be inevitable in the light of the scheme as described.
15. Central to Mr. Gardiner's submissions is the contention that the word `earnings' must be given its proper weight in construing s.6(1). It is looking to what the employee gets and the reference to remuneration underlines that. Indeed, the Secretary of State in the cases concentrated on the words `remuneration or profits' (which do not give an exhaustive definition of earnings because of the use of the word `includes') and stated:-
"The Secretary of State considered that the word [remuneration] normally means a quid pro quo, and extends to whatever consideration an employee gets in return for giving his or her services".
This enables Mr. Gardiner to submit that what the employees got were the policies with an enhanced value and that the payment of the gilts to the insurers was the cost paid by the employers to enable them to provide the policies to the employees.
16. The importance of distinguishing the payment to the employee from the cost to the employer is, submits Mr. Gardiner, established in the cases under income tax legislation which are concerned to establish what are the emoluments upon which the taxpayer must pay tax. Those cases are, he submits, directly applicable. He drew my attention to the National Insurance Act 1965 which by s.4(2) limits the remuneration upon which Contributions are payable to "any emoluments assessable to income tax under Schedule E". But this limitation is not found in the Social Security Act 1973 which laid down a new regime and which is the predecessor of the 1992 Act, itself a consolidating Act. `Earnings' are not generally tied to `emoluments', although the 1992 Act sometimes does (as, for example, in the second limb of s.2(1)(a)) equate the two.
17. I agree with Mr. Henderson that the tax cases are not directly applicable and that I should not, to use his words, approach s.6(1) wearing income tax spectacles. But I cannot ignore them since they are concerned to show how to ascertain what a taxpayer has received and are of assistance in determining how to identify what an earner has earned. It is the distinction relied on by Mr. Gardiner between payments to third parties representing the cost to the employer and what is received by the employee that is not to be imported into the national insurance regime. That submits Mr. Henderson, would be to fail to give proper effect to the words `paid ... for the benefit of an earner' in s.6(1).
18. It has long been established that the payment by an employer to a third party to discharge a debt owed by the employee to that third party represents a taxable emolument in the hands of the employee. It is considered to be money's worth to him and is the equivalent of a payment in cash. This principle is exemplified by Hartland v Diggines [1926] AC 289 where the payment by the employers of a sum to discharge the employee's liability to tax was treated as part of his emoluments upon which he had to pay tax. It has been applied to the national insurance regime in R v D.S.S. ex parte Overdrive Credit Card Ltd [1991] S.T.C. 129. That case is relied on by Mr. Gardiner and so I should consider it with some care.
19. It was concerned with the effect of the provision to employees of credit cards to enable them to purchase petrol. Overdrive agreed with an employer to issue cards to the employer's employees who had full authority to use the cards on their employer's behalf. There were separate agreements between Overdrive and the participating garages whereby the garages debited the cost of the petrol obtained by use of the cards to Overdrive and Overdrive then received payment from the employers. Overdrive contended that a debt discharged not by the employer but by a third party could not constitute earnings, alternatively that there was a payment in kind, namely the petrol, which was excluded by virtue of Regulation 19(1)(d) of the Contributions Regulations. The first argument received very short shrift, Lloyd L.J. saying at p.134a:-
"...there is no difficulty in treating that payment as being made on behalf of the employer. Since the ultimate discharge of the card-holder's personal liability falls on the employer, it should make no difference whether it is done directly or indirectly".
The alternative argument required careful analysis of the nature of the individual transaction between the card holder and the garage. Counsel for the Crown conceded and the court accepted that if the employee made clear to the garage before filling up with petrol that he was buying as agent for his employer the value of the petrol was not to be included in the employee's earnings.
But counsel contended, basing his argument on Hartland v Diggines (supra), that where the employee incurred a personal liability and only tendered the card after filling his tank, there was a payment of money's worth to him when that debt was discharged by the acceptance of his employer's liability to pay instead of him. The court accepted this argument, Lloyd L.J. saying at p.134b-g:-
"Counsel for Overdrive's second reason is much more finely balanced. Assuming the discharge of the card holder's liability would otherwise be included in his earnings, nevertheless it is to be disregarded by virtue of reg 19(1)(d). At the outset of this part of this argument, counsel submitted that, looking at the reality, what the employee receives is petrol in his tank. This should be regarded as a payment in kind. There should be no difference between petrol from a pump on the employer's own premises, which is admittedly a payment in kind, and petrol from a commercial pump. But there are difficulties here; so much that, by the close of his case, counsel was content to rely on the alternative argument that the payment was `by way of the provision of .... other facilities' (see reg 19(1)(d)).
This brings one to the heart of the problem in the present case. Counsel for Overdrive submits that the discharge of an employee's liability by means of a charge card is the clearest possible example of a payment by way of a facility. That is what a charge card is for. It is something which renders easier the performance of the employee's obligation to pay for the petrol, and therefore falls four square within the definition of `facility' in the Oxford English Dictionary.
Again counsel for the Crown is prepared to yield ground. The fact that an employee does not have to carry cash is, he accepts, a `facility' in the broadest sense of the word. But he argues that the use of the card to discharge the card holder's debt goes beyond even the broadest sense of the word, and certainly beyond the meaning of the word in the context of `board or lodging or ... services or other facilities' (see reg 19(1)(d)).
I have found the point, as I say, finely balanced. `Facility' is a slippery word. One sense in which it is commonly used by bankers, namely, an overdraft facility, is not even mentioned in the dictionary. But in the end I have been persuaded that counsel for the Crown's construction is correct. The right approach is to regard the discharge of an employee's debt as the equivalent of a payment in cash, and not less so because that payment is made easier by the use of a charge card. The extent to which the payment is made easier (if it could be measured in money terms) is to be disregarded under reg 19(1)(d). But the payment itself is not.
If that be right, then Overdrive is not entitled to the declaration claimed in para (B). There may be cases where the employee's petrol vouchers will not attract liability to contribute, as where the petrol is used for business purposes, or where he has incurred no personal liability. But as it stands, the declaration is too wide".
20. Two important points emerge from the Overdrive case. First, it is necessary to give effect to the legal result of a particular transaction however artificial that may seem. Secondly, the discharge by an employer of a debt incurred by an employee represents earnings paid on behalf of that employee for the purposes of the national insurance regime. The court is clearly focusing on the employee and identifying what, depending on the nature of the transaction, he gets, whether directly, namely the petrol or indirectly, namely the discharge of a debt owed by him. In the latter case, he gets the equivalent of a payment in cash. Mr. Henderson does not attack the conclusion or the reasoning in the Overdrive case but submits that the argument he raises was not made and that it would have provided another route to the same conclusion. Nothing said by the court is inconsistent with that argument. Finally, Mr. Gardiner relies on the use made by the court of the tax cases and the assistance it derived from them in solving the problem before it.
21. Since tax and national insurance contributions are payable on what the employee receives it would be surprising if, absent special provisions to deal with individual circumstances, the approach should differ. Thus it is, in my judgment, legitimate to seek guidance from the tax cases in identifying what the earner has got by way of remuneration. That may be the same as what the employer has paid, but not necessarily where payments in kind are concerned. In such cases (and Regulation 18 of the Contributions Regulations supports this), the value is the open market value if sold on that day. That means the value to the employee and reflects the approach in the tax field as exemplified by Wilkins v Rogerson (1960) 39 T.C. 344. In that case employees were given a suit by the employers to be obtained from a particular supplier. The cost to the employer was £14.15s; the resale value to the employee was £5. Tax was only payable on the £5, that being the worth of the suit to the employee.
22. The words in s.6(1) are wide and the payment by the employer for, for example, the suit in Wilkins v Rogerson could be said without doing violence to the language to be a payment for the benefit of the employee. Mr. Gardiner contends and Mr. Henderson concedes that there must be a limitation. The question I have to answer is what is the extent of that limitation. I think that Mr. Gardiner is correct to focus on the word `earnings' since that gives the clue. The limitation is that a payment for the benefit of an employee must provide something for that employee and it is the value of what the payment provides that constitutes his earnings. Thus if the payment discharges a debt due, it can properly be regarded as the equivalent of money paid to the employee. If it obtains a benefit in kind, it is the benefit which is the earnings not the payment to obtain it.
23. I did not understand Mr. Henderson to dispute that generally speaking the cost of obtaining a payment in kind should not be regarded as a payment falling within s.6(1). But he contends that an enhancement of an asset in circumstances such as arise in these cases should not be viewed in the same way. The payment of the gilts to the insurers was intended to and did have the effect of providing for the employee the means of obtaining money from an asset he already held. And the value of the gilts represented (subject to negligible fluctuations in value) the amount he would get. Accordingly, the payment can without transgressing the general principle properly be regarded as a payment of earnings for the benefit of the employee. This approach also coincides with the reality of the situation since there was no benefit to anyone other than the employee from the payment in question.
24. Mr. Henderson seeks to distinguish between a payment made to obtain something for and a payment made to enhance the value of something already belonging to an employee. The distinction is attractive where, as here, there is an obvious correlation between the amount of the payment and the value to the employee. But it is necessary to identify what the employee gets and it is the enhancement of the value of his or her policy. That is accepted to be a payment in kind and so will fall within Regulation 19(1)(d) unless subject to any of the exceptions in Regulation 19(5). The exceptions are limited to payments by way of the conferment of any beneficial interest in inter alia policies of life insurance (Regulation 19(5)(b)). The beneficial interest in the policy was conferred on the employee before its value was enhanced and contributions were then payable. Thus Regulation 19(5) does not apply. It would accordingly be somewhat curious if the cost of providing a payment in kind were chargeable whereas the payment in kind itself, which was what the employee received, was not. I recognise that s.6(1) of the 1992 Act will prevail over the Regulations; nonetheless, the anomaly is obvious.
25. In any event, I am not persuaded that the distinction Mr. Henderson seeks to draw is workable. An employer may, for example, pay for the repair or maintenance of an asset belonging to an employee. Examples were given in argument of repairs to his car or improvements to his home. The value to the employee would be the increase in value of the asset but that would be likely to be less than the cost of the repairs or improvements. If Mr. Henderson's argument is right, the full cost paid by the employer should represent the sum on which contributions are payable albeit the value to the employee of the payment in kind obtained by the sum paid was less and perhaps considerably less. I cannot discern any distinction in principle between that sort of case and those before me. If there is to be a limitation to be read into s.6(1), it must be based on a principle which applies in all circumstances. It seems to me that the principle is to be found in what the employee receives whether directly or indirectly as earnings. If it is a payment in kind, it will be disregarded unless specifically brought into account. Payments made to third parties for the benefit of employees must be payments of earnings and so must be equivalent to payments made to employees such as were in issue in the Overdrive case.
26. Mr. Gardiner did submit that in any event a commercial transaction such as the payment to the insurers did not confer a beneficial interest. That argument, which was somewhat faintly pursued, I reject. Whatever else it may do, a sale will confer the beneficial interest in whatever was sold to the purchaser.
27. It follows therefore that the payment of the gilts to the insurers was not `earnings paid ... for the benefit of the earner' within the meaning of s.6(1) of the 1992 Act and that these appeals must be allowed. I confess that I have reached that conclusion with very considerable reluctance. But I cannot strain the language of the statutory provisions even though many might think that the reality of the situation ought to produce a different result. The problem lies in the legislation and the piecemeal attempts to close loopholes which the ingenuity of those advising employers identify and exploit. It may be that at last Parliament is about to legislate in a manner which will make it very difficult if not impossible to avoid liability to pay contributions. If so, it is not before time.

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