Today's Budget

[DonkeyRhubarb]

4.27 Disguised remuneration
At Autumn Statement 2015 the government announced it would ensure that those who have used disguised remuneration tax avoidance schemes pay their fair share of tax and National Insurance contributions. In 2011, the government legislated to clamp down on these schemes. This action successfully protected £3.9 billion, £100 million more than originally estimated.145 Since then, new schemes have emerged which attempt to sidestep this legislation.
These schemes often involve individuals being paid in loans through structures such as offshore Employee Benefit Trusts. The government will raise £2.5 billon146 by taking action to tackle both the historic and continued use of these schemes, beginning with legislation in Finance Bill 2016 and with further action to follow in future Finance Bills. This will include a new charge on loans paid through disguised remuneration schemes which have not been taxed and are still outstanding on 5 April 2019.

That sounds ominous.

[carling]

https://www.gov.uk/government/public...technical-note

Retro machine in full flow.

[webberg]

That sounds ominous.

It is.

The rules will say that unless the loan is repaid by 5/4/19, a tax charge arises.

Quite how a borrower is meant to repay the loan when they are not in control of its terms, is conveniently ignored.

What it does is set a date by which pre and post 2011 schemes involving loans will need to be either agreed as giving rise to no or some liability or be on Court.

The implication is that an APN paid on the same loan will count towards meeting the charge, but it's not spelt out in words of one syllable.

Still reading and thinking

[flamel]

Relating to Part 7A ITEPA 2003 (Part 7A). The government’s view is that avoidance schemes are ineffective and will put beyond any doubt that the schemes do not work by amending Part 7A.

From the documents:
New charge on outstanding disguised remuneration loans
9.Another change to tackle the use of disguised remuneration schemes to date is the introduction of a new tax charge on all outstanding disguised remuneration loans.
10.The charge will apply where:
a. The loan was made at any time prior to the amendments to Part 7A, outlined in Chapter 4, coming into force (including where the loan was made before Part 7A was first introduced);
b. If the same loan was made after those amendments came into force it would be taxable under Part 7A (including if it would already have been taxable under Part 7A if made before it was amended); and
c. The loan, or part of the loan, is outstanding on 5 April 2019.
11.The new charge will not apply where:
a. The loan has been repaid in full before 5 April 2019;
b. The loan is from an amount on which income tax has been accounted for in full, including all years settled under HMRC’s recent settlement opportunities, before 5 April 2019;
c. The loan has been taxed in full under Part 7A before 5 April 2019.
12.A loan is within the scope of the new charge if, had the same loan been made on the date that the new legislation comes into force, it would be taxable under Part 7A. This includes the amendments to Part 7A that are set out in Chapter 4 above.
13.Where this is the case, the charge will fall on any amount of the loan that has not been repaid before 5 April 2019. This means that there will be a period of grace in which the loan can be repaid in full, or the user can settle with HMRC, to avoid the new charge being triggered.
14.In the case of extremely old loans it is possible that it would be very difficult or impracticable to identify whether the loan was a disguised remuneration loan and the amount of the loan still outstanding on 5 April 2019. Consideration will be given to any such situations when legislation for these proposals is drafted.
15.Since the new charge will be part of Part 7A the charge will fall on the relevant employer in the first instance.

[flamel]

Hooray - actual, real retrospective legislation. Not disguised legislation like the last Finance Bill.

I suppose this avoids all those unnecessary court cases and saves on solicitor fees - why bother with that when they can make whatever law they want and apply it as far back as they like. Hooray for British justice!

HMRC are ALWAYS right

[Iliketax]

Relating to Part 7A ITEPA 2003 (Part 7A). The government’s view is that avoidance schemes are ineffective and will put beyond any doubt that the schemes do not work by amending Part 7A.

From the documents:
New charge on outstanding disguised remuneration loans
9.Another change to tackle the use of disguised remuneration schemes to date is the introduction of a new tax charge on all outstanding disguised remuneration loans.
10.The charge will apply where:
a. The loan was made at any time prior to the amendments to Part 7A, outlined in Chapter 4, coming into force (including where the loan was made before Part 7A was first introduced);
b. If the same loan was made after those amendments came into force it would be taxable under Part 7A (including if it would already have been taxable under Part 7A if made before it was amended); and
c. The loan, or part of the loan, is outstanding on 5 April 2019.
11.The new charge will not apply where:
a. The loan has been repaid in full before 5 April 2019;
b. The loan is from an amount on which income tax has been accounted for in full, including all years settled under HMRC’s recent settlement opportunities, before 5 April 2019;
c. The loan has been taxed in full under Part 7A before 5 April 2019.
12.A loan is within the scope of the new charge if, had the same loan been made on the date that the new legislation comes into force, it would be taxable under Part 7A. This includes the amendments to Part 7A that are set out in Chapter 4 above.
13.Where this is the case, the charge will fall on any amount of the loan that has not been repaid before 5 April 2019. This means that there will be a period of grace in which the loan can be repaid in full, or the user can settle with HMRC, to avoid the new charge being triggered.
14.In the case of extremely old loans it is possible that it would be very difficult or impracticable to identify whether the loan was a disguised remuneration loan and the amount of the loan still outstanding on 5 April 2019. Consideration will be given to any such situations when legislation for these proposals is drafted.
15.Since the new charge will be part of Part 7A the charge will fall on the relevant employer in the first instance.

Two other bits that are relevant:

- "the government will amend the PAYE regulations to allow, where appropriate, for the tax and NICs to be collected from the employee where it cannot reasonably be collected from the employer"

- "Others do not use employment arrangements and seek to avoid tax and NICs liabilities on self-employed earnings. ... However, to remove any possible incentive for promoters to market and individuals or employers to use the schemes, the government intends to put beyond any doubt that any attempts to insert arrangements to disguise remuneration or rewards for services do not work."

[DonkeyRhubarb]

But haven't HMRC always maintained that repaying the loans would have no effect on the tax position?

This appears to totally contradict this.

[Iliketax]

But haven't HMRC always maintained that repaying the loans would have no effect on the tax position?

This appears to totally contradict this.

Yes. This just makes HMRC even more right. Or at least right in a way that makes employers believe they are right as it comes with a new PAYE / NIC charge on the employer. And that makes it a lot easier to collect the tax. Of course, there may well be follower notices sent out before April 2019 when HMRC win at the Supreme Court. They've also made changes that mean it will be less attractive for employers to settle after November. But that is nothing to do with contractor schemes.

[flamel]

Yes. This just makes HMRC even more right. Or at least right in a way that makes employers believe they are right as it comes with a new PAYE / NIC charge on the employer. And that makes it a lot easier to collect the tax. Of course, there may well be follower notices sent out before April 2019 when HMRC win at the Supreme Court. They've also made changes that mean it will be less attractive for employers to settle after November. But that is nothing to do with contractor schemes.

"the government will amend the PAYE regulations to allow, where appropriate, for the tax and NICs to be collected from the employee where it cannot reasonably be collected from the employer"

So when they've made the employer fold with a follower notice, they can then make the employee bankrupt too. Therefore, "employers" will fold their companies to get rid of historic debts and liabilities relating to the new retrospective legislation (i.e. rewording of s7A) before 2019.

I assume they've introduced this in case they were to lose a case at any stage.

I'm beginning to wish I was a lawyer with all the fees they're going to generate with this mess.

[carling]

Just when you thought the Gangsters couldnt stoop any lower.