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Tax avoidance ‘spotlights’: 25 July 2019

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HMRC has added new Spotlight 53 to its list of schemes under investigation. This concerns disguised remuneration schemes that use capital advances and offshore joint or mutual share ownership agreements for employees of umbrella companies.

Under these arrangements, a contractor becomes an employee of an umbrella company, or a connected entity such as an offshore company. The employee is paid through two separate payments, on a weekly or monthly basis. The first represents a nominal salary, resulting in payment of little or no income tax and NICs. The second payment may involve ‘capital advances’, paid in the form of weekly or monthly loans.

The employer company then carries out various share transactions, involving an offshore joint, or mutual, share ownership trust. The employee has no direct involvement in the share transactions, but receives monthly or yearly summaries showing their outstanding loans have been repaid as a result of the capital gains and dividends.

These schemes attempt to disguise employees’ earnings and escape income tax and NICs. The employer company also attempts to avoid its tax liabilities through the use of capital gains or dividends that attract other tax reliefs.

HMRC’s view is that these and other similar schemes do not work. See

Issue: 1453
Categories: News