New disclosure rules targeting schemes based on financial and employment products came into force this week, as part of the Tax Avoidance Schemes Regulations 2004.
The rules require disclosure of transactions which are expected to obtain a tax advantage as a main benefit and involve certain employment or financial products.
Companies are investigating whether the new rules will affect alternative company car schemes, including employee car ownership schemes, which effectively transfer ownership of a company vehicle to the employee so they do not have to pay company car tax.
It is currently unclear whether such schemes are affected, but the rules apply to arrangements which ‘have as a main benefit the gaining of a tax advantage’. The tax advantage referred to must be in respect of Income Tax, Corporation Tax or Capital Gains Tax.
Only arrangements that involve certain products require disclosure – financial products and employment products, including loans.
Paymaster General Dawn Primaro said the rules will enable the Government to act swiftly and will ‘deter the creation of contrived schemes whose purpose is to avoid tax’.
She said: ‘The rules will help stop the small minority of individuals who abuse the tax system at the expense of those who pay their fair share.’
The Inland Revenue has pointed out that little will change for affected schemes, other than the need to disclose how they run. However, this disclosure is part of the Government’s battle to crackdown on initiatives deemed as having an effect on the Treasury coffers.
Nick Brown, managing director of Black i Vehicle Management said: ‘We have taken advice and believe that ECO schemes potentially fall within the tax disclosure regulations. ‘Getting an ECO scheme rubber-stamped is one thing.
However, disclosing its existence on company annual tax returns will be unacceptable to a lot of companies.
Summary of the rules
Source: Inland Revenue