Autumn Statement 2015: Disguised Remuneration

The rules on Disguised Remuneration were introduced in Finance Act 2011 to combat the proliferation of planning using employee benefit trusts to avoid income tax.

The legislation effectively prevented many new schemes from being implemented and was coupled with a settlement opportunity provided by HMRC to allow employers to unwind EBTs and to settle their liabilities.  However, many employers took the view that the terms of the EBT settlement opportunity were insufficiently attractive and elected to leave their EBTs in place.

The Government has announced that it intends to take action against those who have used or continue to use disguised remuneration schemes and who have not yet “paid their fair share of tax”.  What form this action will take is not spelled out in the Blue Book.

As part of the same announcement, the Government set out its intention to legislate in the future to close down any new forms of tax planning that avoid tax on earned income and raised the possibility that the future legislation could be backdated to 25 November 2015.

Companies that have outstanding EBTs should, as a minimum, expect further contact from HMRC and further pressure to settle their cases. It is understood that a number of companies have received advance notice that APNs will be issued.

HMRC will also seek to capitalise on their recent win in the Court of Session in the Rangers case to apply pressure on companies with unsettled EBT liabilities, although, until that case has been considered by the Supreme Court, or further appeals have been dropped, the case does not give HMRC the ability to issue Follower Notices at this stage.