Disguised Remuneration Arrangements
20 November 2017
Whilst some employers reached settlements with HMRC in 2015 or earlier this year, many are yet to withdraw from the arrangements and settle their positions. Consequently, yesterday HMRC announced the terms under which contractors, employers and employees may reach a settlement with HMRC to settle their tax and national insurance contributions due for previous tax years. The terms are available for disguised remuneration arrangements such as Employment Benefit Trusts (EBTs), Remuneration Trusts, Contractor Loan Schemes and Employer Financed Retirement Benefit Schemes.
The settlement terms available vary depending on whether the settlement is being reached by an employer or contractor. It is also possible for employees to individually reach a settlement with HMRC if their employer has not already done so and does not wish to settle now. Settling with HMRC will involve paying income tax, national insurance contributions and inheritance tax liabilities on all open years as well as voluntarily paying liabilities where HMRC is strictly legally barred from assessing. Late payment interest will be payable on liabilities for open years and tax geared penalties for errors may be payable too. It is also important to note that in limited circumstances additional amounts may be payable now even if settlements were reached with HMRC in the past, depending on the terms agreed previously. Reaching a settlement with HMRC now should bring historic years’ issues to an end and mean that the planned disguised remuneration loan tax charge on 5 April 2019 does not arise. Depending upon the circumstances, settlements may also be able to cover the tax charges arising if the structure is collapsed immediately after reaching agreement with HMRC.
Not settling with HMRC remains an option but this may come at a price. HMRC’s already announced it may issue Follower Notices and Accelerated Payment Notices where settlements are not reached. It may also take further cases to the Courts. In addition the 5 April 2019 tax charge on outstanding disguised remuneration loans will apply and will not settle historic years’ liabilities.
Consequently, specialist advice should be sought now so that affected taxpayers can decide whether to settle, collapse structures and understand the costs involved. HMRC’s 31 May 2018 deadline to register your interest to settle will come around quickly even if they currently seem some way off.
Follow the link below to read our guidance and the ways in which BDO can assist.