HMRC has issued Spotlight 40: Income trust schemes: misleading advertising'. HMRC have taken a different approach in tackling this latest anti-avoidance scheme: complaining to the Advertising Standards Authority.

Under the scheme:

  • A business establishes a trust for the benefit of suppliers
  • Money is paid into the trust
  • That money is claimed as a deductible expense, on the basis that is to provide incentive to suppliers
  • The suppliers are not aware that they are beneficiaries of the trust and instead the funds are loaned back to the business owner or their family and are unlikely to be repaid.
  • The outstanding loan is used to reduce the IHT estate.

Effectively, the scheme claims to divert income from a business into a trust, which then loans the money back to the business owners and family, claiming that no Income Tax or National Insurance liabilities arise.

The decision of the Advertising Standards Authority (ASA) will set an important precedent for future ‘scheme’ advertising.

  • The website also states that it was “approved by the House of Lords in 2005”.
  • The ASA determined that this statement misleadingly implied that HMRC and the House of Lords had specifically considered and accepted, or approved, this particular scheme.
  • The ASA also considered that the inclusion of the HMRC logo and statements that the scheme was “fully disclosed to HMRC” and “known and accepted by HMRC since 1994” implied that HMRC had considered and approved the scheme after formal consideration.
  • The website did not mention the General Anti-Abuse Rule (GAAR), the Disguised Remuneration rules and proposed new loan charge.
  • It also claimed that the scheme involved “no tax avoidance” and used “statutory reliefs”, which was deemed to be misleading.

An email address is provided for taxpayers who wish to get out of such schemes and who don’t already have a contact at HMRC.


Our guides:

Anti-avoidance: HMRC's spotlights 

Disguised remuneration

External links HMRC's spotlight can be found here.