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Tax avoidance schemes: spotlights and consolidated guidance

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New schemes that purport to avoid tax and NICs and ‘get around’ the new disguised remuneration rules will be challenged, HMRC said in a new ‘Spotlights’ item.

Spotlight 12: Taxing the rewards for work carried out for a UK based employer identifies arrangements that may involve payments passing through a series of companies, loans from a third party or an offshore ‘alleged employer’, deeds of covenant, secondments from one employer company to another, or ‘claims of self employment’.

‘Current legislation ensures that rewards and recognition from working for UK-based businesses are charged appropriately to UK income tax and NICs,’ HMRC said.

‘This legislation applies whether the rewards are routed through employee benefit trusts, employer funded retirement benefit schemes or through any other intermediaries, either as loans, transfers of assets or other payments. The legislation will also apply to such third party arrangements where an employment is disguised as self employment or a contractual arrangement.’

HMRC reiterated a warning that those intent on using trust arrangements to avoid income tax and NICs should be aware that there could be adverse inheritance tax and trust tax consequences.

Most schemes are not featured in the ‘Spotlights’ page. HMRC advise taxpayers to consider any scheme in the light of the advice on tax planning to be wary of, and consult a reputable tax adviser.

Disclosure of tax avoidance schemes

HMRC have also published consolidated guidance to incorporate changes made to the DOTAS regime during 2010/11. The guidance runs to 116 pages and ‘replaces and supersedes’ all previous guidance with effect from 6 April 2011, HMRC said.