HMRC seeks views on tackling disguised remuneration tax avoidance

HMRC has opened a wide-ranging call for evidence on the continuing use of disguised remuneration (DR) tax avoidance schemes, seeking views on its approach, any variations which are not covered by existing legislation, and suggestions for further action

At the Budget in March 2020, the government committed to launching a call for evidence on how to tackle future use of DR tax avoidance arrangements, as part of the response to the independent review of the loan charge led by Sir Amyas Morse.

The Morse review noted the continuing use of DR schemes, and recommended that the government should set out further action to address this. Between April 2019 and May 2020, HMRC identified over 45 schemes being marketed, aimed at individuals and designed to avoid tax on employment income.

The call for evidence follows proposals in Finance Bill 2020-21 for stronger sanctions on tax avoidance scheme promoters and enablers, and will consider in particular further options to tackle promoters of tax avoidance schemes and stop the supply of schemes at their source.

The government is looking closely at all aspects of how promoters run their business, for example how they advertise and market their schemes, how they earn their fees and their relationships with enablers and clients.

The call for evidence will look at whether the government should take further action to put more onus on actors in the supply chain, such as employment agencies, umbrella companies or engagers, to prevent people getting drawn into scheme use.

This could include options to increase the financial risk to promoters from the avoidance schemes they promote; exploring ways to directly disrupt the money flows between the scheme user and promoter or enabler to impact their profits; and options to increase financial risk to enablers of tax avoidance such as requiring them to shoulder the burden of ensuring that everyone in the supply chain, and the promoter, satisfy their tax obligations with liability for the tax and penalties if they fail to comply.

The government is interested in seeking views on where it can go further to counteract action taken by promoters to avoid complying with the rules, both actions it can take to ensure that promoters based offshore comply with all their obligations and any action that would make it harder for promoters to sidestep their obligations.

In addition, the call for evidence will consider taxpayer behaviour, and whether the government should take further action to ensure taxpayers understand the risks of entering schemes and are deterred from doing so.

Finally HMRC is also seeking views on  whether there are any other areas where it can act to stop the use of these schemes.

Glyn Fullelove, CIOT president, said: ‘Despite the persistent efforts of successive governments to stamp it out, DR continues to be a stubborn and insidious form of tax avoidance. Schemes targeting agency workers using umbrella companies continue to operate.

‘The workers themselves may have no idea they are avoiding tax until contacted by HMRC, by which time the umbrella company may have disappeared, leaving the agency worker to pick up the bill.

‘This is a very broad call for evidence – essentially a plea from the government for ideas on how the remaining DR schemes and other avoidance can be stopped. We look forward to engaging with HMRC and providing constructive input into how such schemes can be stopped at source.’

The consultation closes on 30 September.

Call for evidence: tackling disguised remuneration tax avoidance is here.

 

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