HMRC wins employment income avoidance case
A tax tribunal ruling against an income tax avoidance scheme is expected to protect up to 拢400 million in tax that would otherwise not have been paid.
皇冠体育app scheme was marketed by Consulting Overseas Limited to independent contractors as a remuneration package that would save them substantial amounts of income tax and national insurance contributions.
To avoid tax, contractors signed up as employees of an Isle of Man company, Sandfield Consultants Ltd, and agreed to receive about two thirds of their income as loans in Romanian lei, Byelorussian roubles or Uzbekistani soums. 皇冠体育appy then entered into currency trades that were supposed to turn these earnings into non-taxable foreign exchange gains.
皇冠体育app First-tier Tribunal dismissed all the arguments put forward by the contractor, Philip Boyle, in his appeal against HM Revenue and Customs鈥� (HMRC鈥檚) assessments.
皇冠体育app judge found that the loans were 鈥渋n substance and reality income from his employment, bearing in mind in particular that Mr Boyle had no need for a loan, there was an entirely artificial exchange rate; the reality is that there was no borrowing by Mr Boyle and he never believed that the 鈥榣oans鈥� were other than a means of receiving his income without suffering tax on that income鈥�.
皇冠体育app judge also decided that the loans were not genuine: 鈥淣o evidence has been provided at any stage during HMRC鈥檚 lengthy investigation of the scheme, despite many requests for such evidence, to show that the foreign currency ever existed.鈥�
David Gauke, Exchequer Secretary to the Treasury, said:
I am delighted the tax tribunal threw out this contrived scheme, designed to avoid tax.
皇冠体育app unprecedented package of counter-avoidance measures announced in the Autumn Statement, combined with HMRC鈥檚 record of winning over 80% of all avoidance cases taken to court, shows the writing is on the wall for the minority who are prepared to use marketed tax avoidance schemes to get around the rules.
皇冠体育app impact of the ruling
About 15,000 people used schemes similar to that used by Philip Boyle, where contractors receive 鈥渓oans鈥� as a form of payment. Of the 348 users of this scheme, 226 have settled with HMRC and paid approximately 拢5 million. HMRC is continuing to pursue others.
皇冠体育app First-tier Tribunal decision is available on the .