Users of disguised remuneration (DR) schemes who wish to avoid the April 2019 loan charge need to act now to take part in HMRC’s disclosure opportunity as the deadline to disclose is fast approaching. Background Many DR schemes rely on loans to avoid income tax/NIC on employment income. These loans will often be used in conjunction with third-parties like employee benefit trusts (EBTs) and Employer-Financed Benefit Schemes (EFRBS). The Supreme Court’s decision in Rangers v HMRC largely dismissed the effectiveness of these types of schemes and HMRC has been using the decision to pursue unpaid tax/NIC. The government has also introduced a new loan charge to apply to DR loans still outstanding at 5 April 2019. This can leave us...

HMRC has updated its disguised remuneration settlement opportunity (DRSO) to allow taxpayers to pay the amounts due over up to 5 years - and potentially longer depending on their circumstances. Background The DRSO was announced in November 2017, allowing those who have used disguised remuneration schemes to disclose these to HMRC and pay any outstanding tax, NICs, interest, and penalties. Working alongside the DRSO, the government are also introducing a new "loan charge" to apply to certain disguised remuneration loans. These new rules will broadly impose a tax/NIC charge on disguised remuneration loans outstanding at 5 April 2019, effectively bringing years of disguised remuneration into charge at the end of 2018/19. The Apr...

The Sunday Times has reported that HM Revenue & Customs are set to investigate individuals who they believe may have sold a second home and/or rental property but did not report any capital gains tax ("CGT") on their tax returns. Letters will be sent to 1,500 individuals that HMRC has identified as having sold property during the 2015/16 without declaring a CGT liability. The letters will invite taxpayers to explain why they haven't paid the CGT that HMRC’s computer models suggest they may owe.  Failure to reply could result in a formal investigation and increased penalties. If you have any doubts about your tax affairs, then you should speak to a tax professional to ensure you are complying with the law. If you have undi...

HMRC has changed the registration deadline on its disguised remuneration (DR) settlement opportunity. Those looking to take advantage of this opportunity should register their interest as soon as possible. Background As reported in our previous blog, HMRC is currently running a settlement opportunity for users of DR schemes to settle their tax affairs before a new loan charge comes into effect in April 2019. HMRC had stated that users must register their interest by 31 May 2018 and submit all the required information by 30 September 2018. These dates were designed to give HMRC enough time to process cases before the April 2019 loan charge comes into effect. New Deadline Despite the 31 May deadline for registrations havi...

Please note that this article was updated on 1 August 2018. Please see the bottom of the article for further information. Individuals who have undeclared UK tax liabilities arising from offshore income or assets must disclose such items to HMRC under the requirement to correct (RTC) and pay any tax that is owed by 30 September 2018, or face a more severe set of penalties under failure to correct (FTC). HMRC have begun contacting individuals who have sources of offshore income/gains requesting that they consider whether their UK tax compliance obligations have been met. There are generally 2 kinds of approach: HMRC have received information regarding unreported income/gains in an overseas country/territory, and are contacting you ...

HMRC have announced a new settlement opportunity for users of disguised remuneration (DR) schemes. Those wishing to take part in this opportunity must register their interest by 31 May 2018 and make a full disclosure by 30 September 2018. Background HMRC previously ran a similar settlement opportunity for users of employee benefit trusts (EBTs) which closed on 31 July 2015.  A number of DR cases were before the courts around this time including the ‘Big Tax case’ of Rangers v HMRC which was before the Scottish Court of Session. Since then the Court of Session and the Supreme Court have ruled in favour of HMRC, dismissing the effectiveness of EBTs and loans as tax avoidance mechanisms.  HMRC has stated that it intends use t...

The Supreme Court has upheld the decision of the Scottish Court of Session in what has become known as the ‘Big Tax Case’.  The Court found that an employee benefit trust (“EBT”) scheme which redirected employees’ earnings by way of loans from a series of trusts was ineffective for avoiding income tax and NICs. Background The appeal was brought by the liquidators for RFC 2012 Plc (“RFC”), the former corporate owners of the Rangers FC.  RFC itself went into administration in 2012 with and the club itself is already under new ownership. RFC was involved in a tax avoidance scheme designed to remunerate employees of the club. As part of this scheme, RFC would pay a lump sum to a principal trust and would recomm...

Click here to download Issue 3, 2017 of the Personal Tax Newsletter. This issue contains details of the Summer Finance Bill 2017,  provides some insightful statistics on Income Tax, and reviews a recent case concerning maintenance payments from a Will.

HMRC has released a consultation document detailing proposals of new Requirement to Correct (RTC) legislation. The proposed legislation will require any person that has undeclared UK tax liabilities in overseas interests to correct the situation by disclosing the appropriate information to HMRC. This proposal aims to compel such persons to put their UK tax affairs in order ahead of the widespread adoption of the Common Reporting Standard (CRS). By 2018, over 100 countries will be implementing the CRS and exchanging financial information amongst one another which may be used to discover cases of tax evasion. The UK will be adopting CRS in September 2018 and following this, there will be a simplified and more severe set of sanctions for off...

Government plans are set to put more pressure on users of disguised remuneration schemes; including employers, employees, and the self-employed.  Users of these schemes should consider how best to settle any outstanding liabilities as soon as possible. Disguised Remuneration Schemes (DRSs) Whilst each scheme operates differently, promoters of DRSs will often claim that they are an effective way to avoid substantial Income Tax and National Insurance Contributions. Common characteristics include low or no interest loans that will never be repaid in practice, investments of employee's 'earnings' by third parties, and complex networks of third party trusts and companies (often based outside the UK). Previous Action A number H...