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Disguised remuneration avoidance schemes

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HMRC has added two new ‘spotlights’, 35 and 36, to its targeted list of tax avoidance schemes. Both concern disguised remuneration schemes which seek to avoid the proposed new charge on loans outstanding at 5 April 2019, under legislation to be introduced in Finance Bill 2017.

Spotlight 36 refers to schemes that aim to enable users to get out of the loan arrangements and avoid the loan charge by paying a fee to the promoter. HMRC’s view of such schemes is that: ‘the only way you can avoid the new loan charge is by making a repayment of the loan balance or settling the tax liability with HMRC in advance. Any repayments connected to a new tax avoidance arrangement will be ignored and the loan charge will still apply’.

Spotlight 35 highlights a particular scheme which uses annuities as an alternative form of payment. This scheme is mainly aimed at contractors and involves the scheme user being paid in two parts. The first part is a very small salary, giving rise to little or no tax or NICs liability. The second part is designed to be a non-taxable capital payment for a deferred annuity. HMRC’s view is that such schemes are also within the scope of the proposed new loan charge, which will apply to all disguised remuneration loans outstanding at 5 April 2019.


Issue: 1342
Categories: News