When HM Revenue & Customs (HMRC) have challenged a taxpayer over their past tax compliance for whatever reason, it is then time to settle up. Depending upon the nature of the challenge, the concluding document can be referred to as a Letter of Offer, Settlement Agreement, Deed of Settlement and other variations. Whatever the concluding document is called, it sets out which taxpayer(s) owes what tax(es) for which year(s). It will also state when any unpaid balance will be paid.
Terms of Settlement
Where tax is still owed, HMRC’s Debt Management Unit will step in and seek collection.
However, rarely has HMRC previously sought to follow up on any of the “technicalities” before now. The technicalities on Disguised Remuneration Settlements specifically can include:
- Has the Director “made good” the PAYE to the company in order to avoid grossing up under S.223 ITEPA 2003? Inspectors are increasingly asking to see bank statements of both the Director and company as evidence of this being done.
- Has the company claimed the correct of corporation tax relief on any Employers NIC that was “lost”, i.e. not capable of being relieved in any open tax year.
- Have the loans been cancelled or is the debt still collectible by the Trustees?
- Has the Employee Benefit Trust (or other similar structure) been closed down? If not, further Inheritance tax may be due until this is done.
Other legacy issues
Some of the strictures used for Disguised Remuneration may have used a trust as a conduit for pooling assets. However, whilst the Trust Deed may include all employees as beneficiaries, certain employees (typically the shareholders/Directors and/or the founding family) are specifically excluded as Beneficiaries.
The conundrum can be how to pass the assets out of the Trust in order to collapse the Trust and pass the assets on to Excluded Beneficiary?
How we can help
We have a wide range of solutions (not schemes!) to these type of problems, some of which are not just tax related but may require the input of solicitors in order to achieve the objective(s).
Anyone seeking specialist advice can contact me at firstname.lastname@example.org or Andy and email@example.com for an initial free consultation