GAAR Advisory Panel opinions on contractor and employer rewards using loans schemes

Released 7 November 2018

The General Anti-Abuse Rule (GAAR) Advisory Panel has issued two opinions that contractor and employee rewards using loans schemes were abusive tax arrangements.

GAAR Advisory Panel opinion of 11 October 2018: contractor rewards using loans and GAAR Advisory Panel opinion of 12 October 2018: employee rewards using loans both set out the GAAR Advisory Panel’s opinion that the entering into the tax arrangements was not reasonable course of action in relation to the relevant tax provisions and the carrying out the tax arrangements was not a reasonable course of action in relation to the relevant tax provisions.

Under both sets of arrangements, the employee received a national minimum wage salary and substantial loans from the employer company, which supplied the employees services to another company. The creditor rights in the loans were then transferred into an Employer Financed Retirement Benefit Scheme (EFRBS). The arrangements sought to avoid a charge to income tax (and the associated PAYE charge and National Insurance contributions charge).

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