HMRC wins disguised remuneration case

HMRC has welcomed a recent Court of Appeal decision concerning a disguised remuneration case. These types of schemes provide employees with the bulk of their earnings in the form of loans that are used to try and avoid paying Income Tax and National Insurance contributions (NICs).

In the case in question, an IT contractor used a disguised remuneration tax avoidance scheme, entering into an arrangement whereby he worked through an umbrella company based outside the UK to provide his services to UK-based financial service companies.

He received most of his earnings in the form of loans, organised by the umbrella company, which were initially claimed not to be taxable. The taxpayer eventually accepted that he had received taxable income, but he claimed he should not have to pay anything because he was entitled to a notional PAYE credit.  

The Court of Appeal’s agreed with HMRC’s assertion that the taxpayer was not entitled to a PAYE credit. The taxpayers appeal (and cross-appeals) was rejected and HMRC’s right to collect unpaid Income Tax was allowed, without any setoff for a notional PAYE credit. 

HMRC is reminding other taxpayers with similar arrangements that they can still make a settlement under the Disguised remuneration settlement terms 2020. This includes individuals who received loans before 9 December 2010, where HMRC still has open enquiries or assessments.

Source: Court of Appeal Tue, 24 May 2022 00:00:00 +0100

Latest articles

Notifying cessation of self-employment

Any taxpayers that have ceased to be self-employed must notify HMRC of their change in status. There are a number of steps that must be followed if a taxpayer ceases trading as a sole trader or if they are ending or leaving a business

Submitting CIS nil monthly returns

The Construction Industry Scheme (CIS) is a set of special rules for tax and National Insurance for those working in the construction industry. Businesses in the construction industry are known as ‘contractors’ and ‘subcontractors’ and should be

Check employment status for tax

The Check Employment Status for Tax (CEST) tool can be used to help ascertain if a worker should be classified as employed or self-employed for tax purposes in both the private and public sector.

The service provides HMRC’s view if IR35 legislation

Class 1A payment deadline

Class 1A NICs are paid by employers in respect of most benefits in kind provided to employees such as a company car. There is no employee contribution payable. If you provided taxable benefits to staff or directors your business is likely to have a