HMR&C Aware of New Avoidance Schemes
‘Spotlights’ is used by HMR&C to help tax payers from unwittingly entering into arrangements that HMR&C are likely to see as tax avoidance.
The Spotlight announced on 23rd August 2011 states that HMR&C are aware of new tax avoidance schemes, which have been set up to avoid tax and NI contributions, are being advertised to contractors. The claim is that the schemes get around new disguised remuneration rules.
HMR&C list the different types of arrangements that could fall under this Spotlight and leave contractors facing severe financial penalties:
- Passing payments through a series of companies
- Loans from a third party or an offshore alleged employer
- A Deed of Covenant
- Secondment from one employer company to another
- Claims of self-employment
In HMRC’s opinion these arrangements do not succeed in avoiding the tax and NICs due. HMRC will challenge these arrangements and litigate where necessary to recover unpaid tax and NICs.
HMR&C maintain that current legislation ensures that rewards and recognition from working for UK-based businesses are charged appropriately to UK Income Tax and NICs. 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.
HMR&C also warn that there could be adverse Inheritance Tax and Trust Tax consequences from using avoidance schemes that rely on trust arrangements.
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