HMRC warns contractors over new wave of tax avoidance schemes

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HMRC warns contractors over new wave of tax avoidance schemes

Posted Aug 24, 2011

In the latest in a series of 'Spotlight' publications aimed solely at the issue of tax avoidance, HMRC has made a statement on the emergence of a new wave of tax avoidance schemes, aimed at contractors and highly paid employees.

These schemes aim to reduce the tax liabilities of their clients via the use of third party loans, deeds of covenant, or by channeling payments though a series of companies.

Many of the new schemes have been set up following HMRC's clampdown on 'disguised remuneration' which was first announced in December 2010.

According to the Spotlight, such arrangements would not succeed in avoiding income tax and National Insurance Contributions. HMRC says it will challenge any such arrangements, and litigate to recover any unpaid tax liabilities.

IHT and Trust tax consequences

HMRC has also warned that there could be adverse Inheritance Tax and trust tax consequences of joining schemes which use trust arrangements to minimise tax:

"These include IHT charges when contributions are made to the trust, when funds are transferred from a trust to a sub-trust or removed from the sub-trust, when uncommercial loans are made by the trustees and at the ten year anniversary of the trust."

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