Following Malcolm Gunn’s detailed explanation of the draft legislation on disguised remuneration in the December Bulletin, HMRC have published a list of 33 frequently asked questions on the subject. It is presumed that these questions derive from the substantial number of representations which have been received by HMRC on the draft legislation.
It is apparent from these questions (and more particularly from the answers) that the draft legislation had all sorts of unintended consequences which will be put right before it reaches the statute book. The proposals for earmarking were clearly too extreme, and it is also now intended to exclude unfunded, unapproved retirement benefit schemes from the scope of the new rules. Some parts of the draft legislation are not scheduled for change; for example, if you received a loan from an EBT, you will pay tax on it in full – with no relief when it is repaid.
In one way it could be said that this is consultation at its very best; HMRC publish some draft proposals which are reviewed and commented on by an expert community, and the result is legislation which is clearer and free of unintended injustice. Unfortunately, what is wrong with the process is that the ultimate legislation will be backdated to 9 December 2010. This means that for six months nobody knows quite what the law is in this area of considerable emphasis to employers and employees. It is like saying we are going to introduce a congestion charge effective from today if you drive into the city, but we are not going to tell you what the boundaries are for another six months. If you drive in the wrong place during that period you will just have to pay – but it is your own fault because you shouldn’t have been on the road in the first place.
However, there is little point in dwelling on all this. Draft rules have been published, some different draft rules will be published soon and there will be more in due course. Who knows what the end result will be? Let us hope that something a little more certain is revealed at Budget time.