Chancellor Philip Hammond has announced the government intends to extend measures to tackle use of disguised remuneration schemes by employers and employees, brought in following Budget 2016, to cover the self-employed
Hammond said the aim was to ‘ensure that self-employed users of these schemes pay their fair share of tax and national insurance contributions (NICs)’.
The measure will create a new tax charge on historic loans drawn from disguised remuneration avoidance schemes by self-employed users that remain unpaid on 5 April 2019. The legislation will also address current usage of these schemes.
In addition, Hammond signalled the government’s intention to take steps to make it less attractive for employers to use disguised remuneration avoidance schemes, by denying tax relief for an employer’s contributions to disguised remuneration schemes unless tax and NICs are paid within a specified period.
The measure prevents corporation tax and income tax relief for employers’ payments from disguised remuneration tax avoidance schemes unless PAYE and NICs are paid at the outset, or within 12 months from the end of the accounting period for which the deduction has been claimed.
This measure will be effective for transactions entered into from April 2017.
HMRC analysis suggests this new approach will bring in £10m in additional tax in 2017-18, ballooning to £310m in 2019-2020, and dropping to £65m by 2021-22. The predicted yield excludes revenue that is expected to be collected from accelerated payment notices (APNs).
