We understand that PA Holdings has withdrawn its case on a “dividends versus bonus earnings” treatment of employee remuneration which was to have been heard by the Supreme Court. PA Holdings Limited had been granted the right to appeal to the Supreme Court in May 2012.

By way of background, the Court of Appeal had decided that the payments received by the individuals concerned in the PA Holdings case, based on the specifics of that case, were more properly considered to be earnings rather than dividends based on an analysis of the actual statutory provisions.

As a result HMRC are intending to contact those whose appeals remain open or had been stayed pending the outcome of this case.

It is therefore not clear, as a result of the judgment of the Court of Appeal, whether HMRC will decide in other cases that dividends received by shareholders who are also employees should be re-categorised as earnings and as a result taxed at much higher rates than dividends.

In the context of the Government's drive to promote share ownership for employees, the decision in the case could now undermine this objective.

The case is covered in this month's Chartered Accountants Tax Case Digest on page 37.