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October 17, 2014

Taxable Benefits or Maintenance Grant on Divorce? – Samantha Gibson v HMRC

The recent case of Samantha Gibson v HMRC examined whether amounts paid under a maintenance grant could be subject to tax as benefits in kind where the taxpayer was employed by the ex-husbands company.


Mrs Gibson took up employment with Park Industrial & Agricultural Holdings Ltd, a company owned by her future husband, Mr Gibson.  Her salary was set at £12,000 pa and after joining the company she was provided with a car which was paid for from Mr Gibson’s personal bank account.

In 2009 the marriage broke down and she left the matrimonial home and ceased working for the company although she continued to receive her salary until March 2012.

As a result of the divorce, a maintenance grant was ordered by the Court to pay in full the running costs of her car, £3,000 per month and all current and future tax liabilities arising in relation to her employment. Mr Gibson chose to keep paying her salary as part of the order and let her keep the car.

Mrs Gibson filed her tax return for 2010/11 but, due to an acrimonious divorce, Mr Gibson refused to provide her with the relevant information and supporting evidence required. She ‘put zeros in all the boxes’ on the assumption that HMRC would contact the company for the withheld information. Consequently, her tax return did not reflect any pay or benefits from her employment.

HMRC received details from the company relating to her salary, car benefits, car fuel benefits and a beneficial loan assessment. The HMRC accepted the P11D submitted by the employer as being accurate and maintained that for the year 2010/11, in the absence of any evidence from the taxpayer to support her assertions, that the figures provided by the company were correct.

HMRC therefore issued an assessment for 2010/11 in the sum of £6,131.

The Hearing

The salary figure of £12,000 and the income tax on that amount were not under appeal, therefore the case concerned the issue of whether the car and loan benefits were taxable benefits in kind or maintenance payments.

Mrs Gibson provided evidence showing that while working for the company Mr Gibson paid for her fuel out of his personal bank account and, unlike other employees, she was not provided with a company fuel card.

By providing her bank statements and audited accounts for 2010/11, Mrs Gibson was able to prove that she never had a loan from the company. HMRC’s claim was based on factual inaccuracies arising from misleading information given by Mr Gibson.

HMRC’s records showed that Mrs Gibson had the use of a company car in the tax years 2009/10-2011/12 and, in the absence of evidence suggesting otherwise, HMRC maintained that the figures were correct and the car and its running costs should be charged against Mrs Gibson as the person whose income it had resulted from.


The tribunal agreed with Mrs Gibson that the maintenance package agreed between her and her ex-husband included the provision by him of a vehicle plus costs of running the vehicle and to pay all tax liabilities. The car was not used for the company's business and there was evidence that Mr Gibson paid for repairs and running costs from his personal account.

Maintenance payments under agreements or court orders made in the EU are generally outside the UK tax system, meaning that payments are made without deduction of tax and there is no relief for the payer where payments are made out of taxed income or gains.

Therefore, the payments and benefits made to Mrs Gibson by the company must be treated as income in the hands of Mr Gibson and the use of the car was not a taxable benefit in the hands of Mrs Gibson.

The appeal was allowed and HMRC's assessments were discharged.

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