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 General Anti-Avoidance Rule (GAAR) Advisory Panel has published its opinion that companies cannot pay employees in gold bullion in order to avoid tax. This is the first application of the GAAR Advisory Panel since it was introduced in 2013 in order to bring an end to abusive tax arrangements and the decision reinforces the power of the GAAR in tackling abusive tax avoidance. The GAAR Advisory Panel is independent of HMRC and gives their opinion on whether certain arrangements come within the GAAR rules. The GAAR guidance rejects the proposition that taxpayers have unlimited freedom to use their ingenuity to reduce their tax bills by any lawful means and the panel only challenges transactions where a course of action has been taken ...

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...

Finance Bill 2017 has introduced a number of changes which will affect the Inheritance Tax (IHT) exposure of non-UK domiciled taxpayers who hold UK residential property though offshore structures. As a part of these changes, new rules will ‘see through’ to residential property held via offshore close companies and will be included in the non-domiciled individual's estate for IHT purposes. Overview of Current Rules For non-domiciled taxpayers, IHT will normally only be charged on UK situs assets (i.e. assets in the UK). Property outside the UK is normally excluded from IHT where the individual beneficially entitled to it is domiciled outside the UK. Domicile is a common law concept and broadly refers to the country w...

Update -  the proposed changes to class 4 National Insurance for self-employed individuals have now been dropped. See here for further details.  A summary of some of the changes anounced by the Chancellor of the Exchequer in the 2017 Spring Budget, published on 8 March 2017. Income and Personal Tax Personal Allowance and Higher Rate Threshold The personal allowance is increasing from £11,000 in 2016/17 to £11,500 in 2017/18. The basic rate band will increase from £32,000 for 2016/17 to £33,500 in 2017/18. Individuals will therefore be able to earn up to £43,000 before paying higher rate tax. Dividend Allowance Reduction The current tax free allowance of £5,000 for dividend income is to be reduced to £2,000 fr...

The changes to the transactions in land legislation in the Finance Act 2016 will broaden the scope of the existing rules and may be relevant to an individual with an interest in the development or sale of property in the UK. Further details and background to the new legislation may be found here. Background The transactions in land rules seek to ensure that where land in the UK is held for the purpose of realising a gain/profit on disposal, any subsequent gain on the sale of such land is treated as income (as opposed to capital) and taxed at the higher income tax rates. The changes have been enacted as a part of a larger group of actions designed to prevent offshore structures being used to reduce the tax payable in the UK in respect o...

The IR35 Intermediaries legislation was introduced in April 2000 to prevent individuals from providing employment services to clients through an intermediary (e.g. limited company or partnership) in order to reduce or avoid PAYE and National Insurance contributions (NICs). The intermediary will come under the scope of IR35 where the worker would be treated as an employee of the client but for the existence of the intermediary*. IR35 is therefore designed to catch ‘one man’ companies who work almost exclusively for one major client. When IR35 applies, the income of the intermediary is regarded as the worker’s earnings from employment, and the intermediary will be required to operate PAYE and the worker will be subject to income ...

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...

In the recent case of Cyclops Electronics Ltd & Graceland Fixing Ltd v HMRC, the First-Tier Tribunal considered whether a 12 month survival clause was enough for loan notes to be considered restricted securities for tax purposes. The appeals by Cyclops Electronics and Graceland Fixing were heard together because they gave rise to similar questions of fact and law. Furthermore, it was noted that there are several hundred appeals that also raised similar issues that had an interest in the decision. Background The companies undertook a series of transactions which resulted in senior employees receiving loan notes from a third party. The loan notes included a forfeiture provision triggered by the death of the employee. Where the e...

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...