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CIOT queries offshore tax avoidance approach

A leading taxation body has expressed concern about the Government's approach towards disguised remuneration loan charges.

Up to 50,000 individuals and their employers in the UK are thought to have either benefitted from, or used, disguised remuneration schemes in the last 20 years.

HMRC has written to more than 40,000 of those ahead of a deadline to respond, or pay a loan charge on the outstanding balance to, the Revenue before 5 April 2019.

Loans to employees under disguised remuneration schemes will be taxed unless repaid by this date.

Contractors who benefitted from lower income tax rates applied under loan advances, instead of being paid salaries, or received loans after April 1999 may be liable to an income tax charge.

The Chartered Institute of Taxation (CIOT) said HMRC's retrospective approach "should be avoided wherever possible in the tax system".

Ray McCann, president of the CIOT, said:

"The disguised remuneration loan charge imposes a tax charge on the amount of loan outstanding at a future point.

"Extended time limits should only be applied to offshore matters involving high-risk jurisdictions, those that have not agreed to share any tax information with HMRC.

"Strong powers to tackle offshore tax evasion are justified, but we need to remember that this measure is about non-deliberate errors and carelessness."

HMRC said:

"Disguised remuneration schemes that replace income with loans do not work. You should settle your use of these schemes now.

"The loan charge will arise in April 2019 to tax outstanding disguised remuneration loans.

"In most cases early settlement will cost less than under the disguised remuneration loan charge."

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