HMRC have released Spotlight 57: 'Disguised remuneration: tax avoidance by selling future business revenues to a revenue service trust'. 

HMRC describe the arrangements as follows: 

  • A business enters into an agreement with a 'revenue service trust' with offshore trustees. 
  • The agreement claims to have sold the right to a percentage of future revenue to the trust: this is later paid to the trust. 
  • The business no longer holds the revenue and so excludes it from taxable profit. 
  • The trust will deduct a fee for the promoter of the arrangement before either transferring the balance of the revenue: 
    • To a personal management company owned by the business owner (who can then access the funds), or
    • Directly to the business owner, where the funds are labelled as 'loans', 'fiduciary receipts' or something else so that no tax is paid on them.  

HMRC believe these Disguised remuneration arrangements do not work, will challenge promoters and investigate the tax affairs of those using such arrangements. 

  • Users of such arrangements are warned that their use could result in additional tax liabilities, interest on unpaid tax and criminal prosecution where it is found deliberately misleading is presented to, or information is concealed from, HMRC.
  • For transactions that took place after 14 September 2016, HMRC will consider whether the General Anti-Abuse Rule (GAAR) may apply. This can result in a 60% GAAR penalty
  • If you are using these or similar schemes you are strongly advised to seek professional advice, withdraw from them and settle your tax affairs.

Useful guides on this topic

General Anti-Abuse Rule (GAAR)
What is the GAAR? What taxes does it cover? When might it apply? What tests are considered?  

Disguised Remuneration Zone
What is disguised remuneration? What is the loan charge? How can I settle disguised remuneration, EBT or contractor loans with HMRC?

External link

Spotlight 57: 'Disguised remuneration: tax avoidance by selling future business revenues to a revenue service trust'