The Finance Bill 2017-18 contains the next tranche of legislation on disguised remuneration.
The government has been introducing legislation to tackle existing, and to prevent the future use of, disguised remuneration (DR) avoidance schemes. These schemes have been used by employers, employees and the self-employed, and claim to avoid income tax and NIC on remuneration.
The majority of the legislation has already been enacted in Finance Act 2016, Finance Act 2017 and Finance (No.2) Act 2017. Most of the remaining primary tax legislation was published in draft with a technical note on 13 September 2017 and we commented on it in ICAEW REP 113/17. Additional draft legislation was published on 22 November along with a policy paper setting out impacts.
On 1 December, the government published legislation in Finance (No.2) Bill 2017-19 (referred to as Finance Bill 2017-18) together with a technical note. This will be enacted as Finance Bill 2018.
In broad terms, the Finance Bill legislation relating to employees (clause 11 and Sch 1) and the self-employed (clause 12 and Sch 2) has four main objectives:
For NIC, the 1 December technical paper links to a draft NIC draft statutory instrument and draft primary legislation to remove NIC liability in prescribed circumstances.
HMRC’s technical notes also mention that HMRC would like to discuss settlement terms with all DR scheme users. In our news item A settlement opportunity for loan schemes we drew attention to HMRC’s settlements guidance published on 7 November 2017.
The policy paper published in November sets out the impacts. Interestingly, while stating that the ‘package is unlikely to have a material impact on family formation, stability or breakdown’ and is expected to impact up to 40,000 employed individuals and around 10,000 self-employed individuals, it does acknowledge that some will be unable to repay the loans, agree a settlement with HMRC or pay the loan charge arising on 5 April 2019, and some will become insolvent as a result.