Gold bullion schemes (Spotlight 30)
Published 6 May 2016
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At Budget 2016, the government announced a package of changes to tackle the current and historic use of disguised remuneration tax avoidance schemes. This includes action with immediate effect from 16 March 2016 against schemes such as ‘gold bullion’ avoidance schemes, putting beyond doubt that these schemes aren’t effective.
These schemes seek to disguise remuneration to individuals through paying them via a series of transactions buying and selling an asset, commonly gold bullion.
There are a few of these schemes but they have a common feature where an individual claims to be paid in the form of an asset, such as gold bullion. They have a theoretical obligation to pay the value of the asset to a trust at some point in the future - it is claimed that this obligation makes the payment non-taxable. However, in instances seen by HM Revenue and Customs (HMRC) so far, the individual has actually taken cash, thus supporting HMRC view this is a payment of earnings.
HMRC believe that these schemes don’t work and has opened enquiries into users of these schemes, and will continue to do so as it becomes aware of new users.
HMRC will challenge these schemes wherever possible, including legal action through the courts. Despite this, promoters have continued to market these schemes.
To put the matter beyond doubt, the government announced that legislation will be introduced in Finance Bill 2016 that comes into effect from 16 March 2016.
HMRC will investigate tax returns where these schemes have been used and seek full settlement of the tax due, plus interest. HMRC will also seek penalties where appropriate.
Taxpayers who have used these schemes should also make themselves aware of wider changes announced in Budget 2016 to tackle usage of disguised remuneration schemes.
The government will introduce legislation to ensure that all loans, debts or obligations arising from a disguised remuneration scheme, irrespective of how the scheme claims to work, will be taxed as earnings if they haven’t already been taxed or repaid by 5 April 2019. More detail is set out in the technical note published at Budget 2016, in particular paragraph 4 of chapter 4 and example 1.
If you’re ever tempted to enter an avoidance scheme, remember that you can end up significantly worse off.
HMRC published guidance on those Tempted by Tax Avoidance and publications that guide taxpayers through the misleading statements promoters may make.
If the scheme looks too good to be true, it almost certainly is: being paid in gold bullion is clearly extremely unusual and should be a warning to anyone looking at this kind of scheme not to get involved.
To get out of a gold bullion tax avoidance scheme before HMRC challenges the arrangements in court, you should email: ca.admin@hmrc.gov.uk.