Disguised remuneration scheme under the spotlight

HMRC has added Spotlight 53 to the list of schemes under investigation concerning disguised remuneration schemes involving the use of capital advances and offshore joint or mutual share ownership agreements for employees of umbrella companies.

Under the arrangements a contractor becomes an employee of an umbrella company. The employee may sign a loan or capital advance agreement and a joint or mutual share ownership agreement confirming how their salaries are to be paid by the employer company. This will be two separate payments: a nominal salary resulting in little or no income tax and National Insurance with the second one paid as a weekly or monthly loan.

The employer company then carries out share transactions involving an offshore joint share ownership trust. These are said to result in financial gains for the employee who receives monthly or yearly summaries showing their outstanding loans have...