By Steven Pinhey, Tax Director
020 7490 7766
HMRC publish details of the tax avoidance schemes that they are aware of and which they consider do not work as part of their ‘Spotlight’ initiative.
Spotlights have been around for a number of years and their aim is to set out how the scheme in question operates, comment on HMRC’s view on the viability of the scheme and indicate the remedial action it expects from the taxpayer and the action that the taxpayers can expect from HMRC it they use or continue to use such a scheme.
HMRC have recently issued two new Spotlights both aimed at disguised remuneration rules. The Spotlights cover:
Spotlight 35 – Disguised remuneration: tax avoidance using annuities
HMRC have said that they will investigate anyone who uses annuities as an alternative method of payment to avoid Income Tax and National Insurance Contributions (‘NIC’).
They also state that schemes involving annuities are within the scope of the proposed new ‘loan charge’ on disguised remuneration loans outstanding on 5 April 2019 and any capital sum for a deferred annuity not paid back in full by that date will be subject to the charge.
HMRC expect taxpayers to settle with them as soon as possible or face tax, interest and a possible penalty.
Spotlight 36 – Disguised remuneration: schemes claiming to avoid the new loan charge
Leading on from Spotlight 35, HMRC has advised that it intends introducing a targeted anti-avoidance rule to ensure that any schemes devised to avoid the new ‘loan charge’ on disguised remuneration loans outstanding on 5 April 2019 will be ignored and the loan charge would still apply. The loan charge is calculated by applying both PAYE and NIC on any loan amount still outstanding on 5 April 2019.
In both Spotlights where transactions took place after 16 July 2013, HMRC will consider whether the General Anti-Abuse Rule (‘GAAR’) applies and for those transactions entered into after 14 September 2016 will also consider the 60% GAAR penalty.
If you have concerns over the impact of the impending loan charge and would like to discuss your options with Steven Pinhey who heads our Tax Disputes and Resolution service please give him a call.