Disguised remuneration crackdown ‘in difficulty’

Providers of ‘disguised remuneration’ schemes who are based overseas but promote their services to Britons are causing the taxman “difficulty” in its attempt to recoup tax they have avoided.

Speaking to the House of Lords, Dave Hartnett of Revenue & Customs said HMRC’s disclosure regime, and its exchange of information provisions, had “no bite” in low tax jurisdictions outside the UK.

Singling out disguised remuneration providers in the Isle of Man and in Jersey, he said they have “been the difficulty” to HMRC, for “not always” being covered by the UK’s treaties and data-sharing provisions.

As a result, heard the Lords Economic Affairs Finance Bill Sub-Committee, some disguised remuneration schemes based in such offshore locations “have been pretty opaque to us for some time.”

Tax Research UK’s Richard Murphy, who has also given evidence to the Lords committee, offered a less ambiguous version of Mr Hartnett’s testimony.

“Here we have the head of HM Revenue & Customs saying the Crown Dependencies and others are seeking to undermine the UK tax system,” he said.

“So let’s have no more claims from such places on their well regulated, open and transparent systems: the blunt fact is they’re being used by some…to undermine the UK tax system”

That undermining was valued by Mr Hartnett at £1.5bn – the sum of potentially lost revenue to the exchequer, from the activities of 50,000 employees involved with some 5,000 employers, Accountancy Age reported.

And making the legislation to tackle such disguised remuneration less detailed, as some advisors have urged, was not viable because without all the measures “the nation would have lost a fortune.”

Mr Hartnett’s more positive reflection was that, despite the challenge offshore disguised remuneration schemes pose to HMRC, the coalition government is not as ready to use retrospective legislation.

But he reportedly said that if he were to warn ministers of a wholly exceptional case involving the loss of huge amounts of revenue, then the backdating of tax legislation, as prevalent under the Labour administration, might be considered.

Jun 07, 2011