Disclosure of Tax Avoidance Schemes – Updated guidance for scheme promoters and employersMonday, November 3rd, 2008
The Finance Act 2008 and Regulations made under that Act introduce new requirements for promoters of tax avoidance schemes from 1 November 2008. HMRC has updated the booklet Disclosure of Tax Avoidance Schemes to include the changes. The legislation applies to any arrangement that will, or is expected to, provide the user with a tax advantage when compared with adopting a different course of action. It includes schemes that seek to take advantage of the law relating to PAYE income tax, the taxation of benefits-in-kind and expenses, and National Insurance contributions.
In understanding the implications from employers, the first change involves the introduction of the concept of a “co-promoter”. When a scheme is made available by more than one person, such as the scheme designer and by those who provide the scheme under a licensing agreement with the designed, the co-promoters must also meet the disclosure requirements, including the requirement to provide the users of the scheme with the relevant scheme reference number.
From 1 November 2008, HMRC will allocate a scheme reference number (SRN) to any scheme that is disclosed and give it to the person who disclosed the scheme and to any co-promoters involved in the disclosure. Each of the promoters is then required to pass on the SRN to each scheme user, using form AAG6, within 30 days.
On receiving an SRN, the employer must complete and submit form AAG4 for each tax year for which the scheme is expected to provide a tax advantage, by 19 May following either the end of the tax year in which the scheme reference number is received, or the expected tax advantage arises, whichever is the earlier. It is the employer who must complete the form, not the individual employees directly receiving the tax advantage.
Although there is an exception from disclosing tax avoidance schemes for small and medium-sized enterprises, i.e. basically those with fewer than 250 employees, all employers, irrespective of their size, must declare any SRN they receive, using form AAG4.
Please note that the above is only a summary of the employer-related changes from November 2008 and any employers receiving an SRN should consider HMRC’s more detailed guidance.
Disclosure of tax and National Insurance Avoidance Schemes (Income Tax, Corporation Tax, Stamp Duty Land Tax and National Insurance contributions (November 2008)
Disclosure of tax and NICs avoidance schemes
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