Spotlight 46 – GAAR panel publishes opinion on loan schemes
17 January 2019
- The General Anti Abuse Rule (“GAAR”) panel has given its opinion on two recent cases where employees were paid via loan schemes
- One case involved a contractor and the other an employee. The arrangements included use of loans and the transfer of creditor rights into an Employer Financed Retirement Benefits Scheme (EFRBS)
- In both cases, the individual was employed by a trust which paid them a small wage along with much larger loans which were not reported as taxable income
- The GAAR panel decided that there was no reason for the arrangements to be structured in that way other than to seek a tax advantage
- Transactions entered into after 14 September 2016 which fall foul of the panel’s opinion could be subject to 60% GAAR penalty where GAAR applies
Aspire Comment
As with Spotlight 45, it seems unlikely that, without HMRC naming a specific company, scheme or arrangement, individuals will recognise that this may apply to them. Despite this, HMRC utilises its scaremongering tactics by stating that if anyone has taken part in ‘very similar arrangements’ to the ones considered by the panel, a HMRC officer may issue a counteraction notice. The Spotlight also refers to HMRC using accelerated payment notices to collect the disputed tax upfront whilst the investigation is ongoing.
If an arrangement is entered into after 14 September 2016, the transactions may also be subject to a 60% GAAR penalty where the GAAR applies.
In addition to APNs, counternotices and GAAR penalties, HMRC also use the spotlight to remind taxpayers that failure to settle tax affairs by 5 April 2019 will result in any loans outstanding being subject to the loan charge.
Previous Aspire Spotlight news:
HMRC’s Spotlight 32 updated following Upper Tribunal ruling
HMRC Spotlight 39 published regarding disguised remuneration