An amount of £800,000 was paid to an Employee Benefit Trust (EBT), and a loan of the same value was subsequently extended to one of the directors of the appellant. The loan provided was a genuine one, backed by a legitimate obligation for repayment. At the time of the payment to the EBT, it was evident that the primary purpose was to enable the EBT to offer the loan to the director. Consequently, the question arises whether this loan should be considered a reward or benefit.

The answer to that question is affirmative; yes, it was a reward or benefit. The payment of the loan was made as a result of the director’s exertions. As such, the loan falls within the scope of Section 62 of the Income Tax (Earnings and Pensions) Act (ITEPA) and is deemed as earnings.