At Budget 2016, the government announced a package of changes to tackle what it describes as disguised remuneration avoidance schemes.
On 10 August 2016, HMRC published a consultation document entitled “Tackling Disguised Remuneration: technical consultation”. This consultation includes more detail on the changes the government will introduce in Finance Bill 2017 and includes draft legislation in relation to some of the proposals.
The document is detailed and wide-ranging, and includes proposals to:
- introduce a new “close companies’ gateway” to Part 7A of the Income Tax (Earnings and Pensions) Act 2003, to tackle arrangements which are purported not to come through the existing Part 7A gateway because they are not connected to employment
- impose a Part 7A tax charge on loans made after 5 April 1999 that are not repaid by 5 April 2019, and to ensure that any loans transferred or written-off are subject to income tax
- transfer the PAYE and NICs liability arising on a Part 7A charge to the employee in certain circumstances.
The consultation also includes provisions to deny a corporation tax charge for disguised remuneration arrangements and to tackle arrangements similar to those targeted by Part 7A, but involving self-employed individuals.
The proposed new the legislation will be retrospective in effect and is likely to have a serious impact on those who have used EBT structures.
The consultation closes on 5 October 2016.
A copy of the consultation document can be found here.