As part of a wider package of future changes aimed at tackling the use of disguised remuneration schemes, the Finance Bill 2016 will make a number of amendments to the disguised remuneration legislation introduced in 2011. These include the introduction of an additional targeted anti-avoidance rule (with effect from 16 March 2016) aimed at an avoidance scheme which seeks to exploit a perceived weakness in the current disguised remuneration legislation and the withdrawal of transitional relief on investment returns arising from disguised remuneration where the original earnings charge on the disguised remuneration has not been settled with HMRC on or before 30 November 2016 (in which case, the disguised remuneration legislation would apply to such investment returns).

Future changes, on which the government intends to consult over the summer, include the introduction of a new tax charge on all disguised remuneration loans which are outstanding on 5 April 2019, the power for HMRC to transfer PAYE liabilities to employees where they cannot reasonably be collected from the employer (for example because they are based offshore) and new rules which put beyond doubt that any attempts to insert arrangements to disguise remuneration or rewards for services do not work.

The message from the government is clear – existing users of avoidance schemes should collapse those schemes and settle any outstanding liabilities before any concessionary treatments are withdrawn, and promoters and potential users of new arrangements will find, if they are not already caught by the existing disguised remuneration legislation, that new legislation will be introduced, if necessary with retrospective effect, to counter them and ensure that ultimately everyone pays their fair share of tax and national insurance.

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