At Budget 2016 the government announced a package of changes to tackle disguised remuneration avoidance schemes to ensure users of these arrangements pay their fair share of income tax and National Insurance contributions.
This technical consultation includes more detail on the changes the government will introduce in Finance Bill 2017. In order to provide as much detail as possible an early draft of the legislation has been included in the consultation document.
This consultation also includes details of proposals to tackle similar schemes used by the self-employed, and proposals to restrict the tax relief available to employers in connection with the use of these schemes.
The government would like to hear views from anyone who is affected by, or interested, in these changes. This includes both users and promoters of disguised remuneration schemes, as well as the accountancy and tax professions.
The consultation document, which includes draft legislation can be found here.
The closing date for comments is 5 October 2016.
Disguised remuneration was one of the first areas of tax avoidance tackled by the then coalition government. These schemes usually involve an individual’s income being funnelled through a third party, with the money often then being paid to the individual as a ‘loan’ that is never repaid.
In 2011 the government legislated to clamp down on disguised remuneration schemes. The government estimate that this legislation protected almost £3.9bn of tax, £100m more than originally expected.
HMRC gave users of those schemes a chance to settle their liability and collected around £1.5bn as a result.
However, the government identified that disguised remuneration continues to be a significant risk to the Exchequer, hence the purpose of this consultation.
