Exiting Remuneration Trusts can be tricky
Exiting Remuneration Trusts raise a number of issues that need to be addressed. Finding a tax solution (particularly one that is acceptable!) may have become easier for some with HMRC’s new Settlement Terms recently announced.
HMRC offer a new Settlement Opportunity for 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
HMRC use information received under the Common Reporting Standard to identify those ignoring the Loan Charge
HMRC are writing to taxpayers that have outstanding loans from their EBTs, EFRBs and other offshore structures. HMRC use information received under the Common Reporting Standard to identify those ignoring the Loan Charge. The origins of some of these arrangements go back to the 1990’s and have been “forgotten” – that is until now.
HMRC views some tax avoidance schemes as a “misrepresentation of the true nature of events”
According to HMRC, the fine line between tax avoidance and tax evasion has been crossed and deliberately so. HMRC’s unit known as Offshore Corporate and Wealthy (OCW) was established in the wake of the ‘Panama Papers’ scandal in 2016 to investigate serious non-compliance by businesses and the wealthiest taxpayers
HMRC settlement opportunity for Eclipse Film Partnership members
The Eclipse Film Partners (numbers 1 to 40) Limited Liability Partnerships (Eclipse LLPs) were complex financial arrangements and a form of tax avoidance. Through their “investment”, taxpayers aimed to generate large interest payments on bank borrowings, presented as contributions to the capital of the Eclipse Film Partnership, so they could buy film rights. HMRC did not accept the borrowings for the “investment” were real.
Offshore does not mean off HMRC’s radar
The fact a taxpayer has an offshore bank account or an offshore trust or offshore anything can raise or add to the concerns of HMRC. Not so much as “what is there to hide” but more the fact that its not so transparent compared to being on the mainland UK.
GSOPs and CFDs – HMRC offer an opportunity to reach a Settlement
GSOPs and CFDs were mechanisms designed to reward Directors and key employees in return for achieving specific targets. The promoters argue that any payments out to an individual under a GSOP or CDF were subject to Capital Gains Tax (CGT).
The legacies of tax avoidance schemes
As the passage of time has shown, participating in tax avoidance schemes is not for the faint hearted. “I wish I had never done that” I hear regularly. Some taxpayers may only participated perhaps once or twice in whatever scheme it is but they have been in a nightmare ever since. And that goes for the advisers too!
Is HMRC stopping you from passing on your business?
The family has worked hard all their lives to create the family business it is today. Retirement may beckon in sunnier climes but all that is being prevented by HMRC. Why – because some years ago the company chose to reward its key employees by participating in a tax avoidance scheme.
HMRC wants to talk about reaching a Settlement
Being challenged by HMRC can be a major distraction to any taxpayer. It can impact on life both at work and at home. It is therefore often uppermost in any taxpayer’s mind to seek a Settlement as soon as possible. Then they can get on with their lives.