Last chance for participators in tax avoidance schemes to settle with HMRC?

Individuals who participated in disguised remuneration tax avoidance schemes (which typically involved money being moved to an offshore trust, EBT or EFRB before being loaned back free of income tax) should very carefully consider whether they should now register an interest to settle with HMRC.

HMRC have provided an opportunity for scheme participators to settle on relatively favourable terms; the deadline for registering an interest to settle is 31 May 2018. Registering an interest to settle does not commit that person to settle up with HMRC. They will then have until 30 September to supply HMRC with all the information required to determine the amount of tax and NIC that should have been paid. The decision whether to settle or not can then be made.

Anyone who does not settle with HMRC and who has outstanding loans from such trusts on 5 April 2019, will be subjected to a disguised remuneration loan charge. The amount of outstanding loan will essentially be taxed as though it were salary received at that moment in time.

Although the architects of some of these schemes are likely to challenge the validity of the new loan charge in the Courts, there is a growing feeling amongst those in the know that HMRC will ultimately prevail. Participants in disguised remuneration schemes therefore need to consider if they should now adopt a damage limitation strategy.

I have helped a number of clients to settle their affairs with HMRC; please contact me if you have any queries about this [email protected].