HMRC have launched a number of enquiries in to taxpayer’s returns regarding arrangements involving a non UK employer remunerating contractors and other professionals via loan rather than salary for duties performed in the UK. HMRC have publicly stated that they do not believe these arrangements achieve the tax advantage they were intended to and that the loans should be treated as remuneration and taxed accordingly. Over the next couple of months it is expected that HMRC will start issuing assessments to taxpayers for the amount of tax they believe is due.

The launch of these enquiries is reflective of HMRC’s continued push to attack arrangements involving what they believe to be is ‘disguised remuneration’. In the last few years much of the focus from HMRC has been on the use of ‘Employee Benefit Trusts’ (‘EBT’) which have been established with the intention of creating a tax free revenue stream. In response to the widespread use of such arrangements, HMRC created the ‘employee benefit trusts settlement opportunity’.

Individuals who have entered in to arrangements where loans have been received rather than remuneration can now take advantage of this settlement opportunity in order to settle the historic tax liabilities. In order to encourage taxpayers to come forward, HMRC have stated that they will not in most circumstances seek to levy a penalty in relation to the historic tax and potentially national insurance liabilities.

The settlement opportunity is not available to those who are subject to any of the following:-

  • A HMRC criminal investigation
  • An enquiry under the Civil Investigation of Fraud procedures

You will also not be able to enter in to the terms of the settlement opportunity if you are a UK employer who has used an EBT and should be seeking to make settlement via the EBT settlement opportunity.

HMRC have asked that those seeking to make use of the settlement opportunity to contact them by 9th January 2015.

Edwin Coe LLP has significant experience assisting taxpayers seeking to disclose historic tax liabilities to HMRC and managing complex tax investigations. Those considering entering in to the settlement opportunity should seek professional advice before doing so in order to understand what their exposure will be and to assist with any potential HMRC negotiations regarding penalties.

If you require further information about this topic please contact a member of our Tax team.

Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.

Edwin Coe LLP is a Limited Liability Partnership, registered in England & Wales (No.OC326366). The Firm is authorised and regulated by the Solicitors Regulation Authority. A list of members of the LLP is available for inspection at our registered office address: 2 Stone Buildings, Lincoln’s Inn, London, WC2A 3TH. “Partner” denotes a member of the LLP or an employee or consultant with the equivalent standing.

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