Contractors’ tax affairs may be subject to further scrutiny by HMRC, following the announcement by Exchequer Secretary to the Treasury David Gauke of a new anti-avoidance campaign targeting ‘disguised remuneration’.
According to Gauke, trusts and ‘other vehicles used to reward employees’ and which enable contractors to avoid or defer National Insurance Contributions (NICs), may be subject to new legislation. Pension schemes that ‘provide a tax-advantaged alternative to saving beyond the annual and lifetime allowances’ will also be tackled says Gauke.
What form any new or amended legislation might take is to be made clearer in a further announcement, the timing of which is not yet known.
The announcement came alongside a raft of anti-avoidance measures designed to contribute towards closing the ‘tax gap’ – the shortfall between the sum which HMRC forecasts it can generate in tax income and what is actually paid by taxpayers.
Rules to stop companies using intra-group loans and derivatives to cut tax bills come into effect immediately, but are not likely to impact on contractors. Businesses that artificially split the supply of services to avoid VAT will also be targeted.
Although the moves fall short of imposing the widely anticipated General Anti-Avoidance Rules, or GAAR, Gauke has commissioned an expert study, to be led by Graham Aaronson QC, which has been tasked with reporting on its findings by October 2011.