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Another attack on loan schemes

HMRC continues its attack on loan schemesfor employees

On 10thAugust HMRC published their consultation document on tackling disguisedremuneration meaning that from April 2017 many contractors who are in existing 'tax efficiency' schemes involving loans and trust will have to pay taxes onthose figures. They also propose that having to pay those taxes up front is themost likely course of action which means these trust based arrangements form nofinancial benefit to those involved.

Oneexample provided was where a Limited Company as 'employer' may make what istermed a loan of £10,000 to their 'employee'. The employer then enters into anarrangement with a trust, of which the employee is a beneficiary, with the endresult being that the employee owes the trust £10,000.

They usethis example to indicate how some contractors are operating through these trustbased schemes with the advice from their accountants and belief themselves thatthis can make them more tax efficient. However, HMRC in their consultation haveclearly pointed to almost every occasion where this 'loan' will besubject to income tax. It is HMRC's clear policy to refuse to accept this asanything other than remuneration.

Tofurther affirm these rules HMRC are proposing to allow for transfer ofliabilities to the employee meaning if contractors close down a business theycan still be expected to pay any taxes owed by the business years later.

These arestill consultation proposals, but with HMRC's current dogmatic approach,contractors should be looking closely at their set up and ensuring they areoperating within HMRC's future plans.

ThisArticle is written solely for advice purposes and neither the writer nor Stellartaxaccept no liable where anything herein is acted upon without your obtainingproper accountancy and legal advice.


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