HMRC have published Spotlight 56 entitled Disguised remuneration: tax avoidance by owner managed companies using Remuneration Trusts.
“Spotlight’s” are news letters used by HMRC to highlight areas of tax planning which they consider are tax avoidance and are being reviewed by them, in this case Remuneration Trusts.
Very broadly a Remuneration Trust is used to make tax free loans to the director or principal of a business. At the same time the business is able to claim a tax deduction for its contributions to the trust.
HMRC have previously made it clear they will challenge these types of arrangement and that users of the schemes have been misled by the promoters of the schemes. They have issued several Spotlight warnings for users of the schemes to stop using them and to settle any taxes that were due.
However HMRC’s stance has now changed.
The new Spotlight provides guidance on the current position HMRC will take when looking at the use of Remuneration Trusts and confirms that the independent General Anti-Abuse Rule (GAAR) Advisory Panel opinion is the same as HMRC’s i.e. that the arrangements are tax avoidance. This now gives HMRC the ability to pursue tax and charge penalties where Remuneration Trusts have been used.
Users of Remuneration Trusts Schemes are urged to speak with their advisers and take steps to withdraw from using these schemes and settle their tax positions. The potential tax implications are complicated and we recommend that you take specialist tax advice to do this, f you would like independent and impartial advice from a leading Tax Advisory firm please do not hesitate to contact us.