HMRC offer a new Settlement Opportunity for Remuneration Trusts

Remuneration Trusts

There is no doubt that tax avoidance evolved over the years.  I first came across tax schemes in the 1990’s when there were more “simple” schemes such as investments in platinum sponge and alike.  Then they progressed to Employee Benefit Trusts and Remuneration Trusts through which owners of businesses were given interest free loans.  Certain scheme providers became even more inventive and made similar advances to “suppliers” through entities based in the Caribbean.

I have helped many taxpayers “get their lives back” by reaching a Settlement with HMRC.  Knowing what is available and how to present the facts have been key.

As far as HMRC are concerned, none of these tax avoidance schemes work and they do not achieve the desired avoidance of tax (and NIC).  But their use certainly does complicate matters for all concerned!

So what’s new?

This Settlement Opportunity is specific as to which schemes it can apply to.  Or rather the facts that lend themselves to being appropriate and qualify for entrance into the Settlement Opportunity.  It may be that they are referred to as Creditor Protection Trusts or Supplier Trusts.

What are the terms?

Where the facts fit, there are two pathways:

  1. Company Settlement (with 3 options); or
  2. Self-employed and partnership basis.

In all cases, the terms of the Settlement Opportunity must be considered carefully.

In summary, for the purposes of reaching a Settlement with HMRC, the “Trust” never existed.  Therefore Inheritance Tax cannot apply.  In a bid to cut through what some might consider to a convoluted smoke screen, HMRC have sought to follow the money.  Where did the money actually go?  What route did it actually take?

Back to basics

Despite the fact that there may be documents to the contrary, HMRC seek to ignore the existence of the “trust” for good reasons.  The company that made the contribution (Company A) knew from the outset that somehow the shareholders/directors (Mr X and Mrs Y) would ultimately receive the funds (after certain fees had been deducted).  The trustees of the trust may never have controlled the funds – that role was performed by others including possibly the scheme promoter.

If there wasn’t a trust, what was there?

This is where yet more fog can descend rapidly.

Imagine the scenario where Company A wants to give Mr X and Mrs Y tax free money and is not too concerned how it is achieved.  Company A funds the contribution to an entity (perhaps known as a Creditor Protection Trust) in which neither Mr X nor Mrs Y have any role or obvious connection with.  They are certainly not employed by the Creditor Protection Trust.   Mr X and Mrs Y are however, both suppliers or both creditors to and the Creditor Protection Trust.  It is the Creditor Protection Trust that wishes to invest funds in both Mr X and Mrs Y.

What is payable to HMRC?

If a successful application is made to HMRC for this Settlement Opportunity by 31 July 2022, full tax computations need to be provided.  The accounts and tax computations of both the paying entity and the receiving entities need to be revisited and all the taxes (including NIC), interest and potentially penalties need to be paid.  Time To Pay may also be possible.

Who should apply?

Anyone wishing to exit tax avoidance should consider their options sooner rather than later.  For those that don’t, they can expect another round of Accelerated Payment Notices etc. to follow.

Any one unsure or wanting to explore this or any other means of regularising their past tax compliance can contact me for a free initial consultation on a no obligation basis.

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