Article Summary
This guidance note provides an overview of the disguised remuneration legislation in the UK. The rules were introduced over a decade ago to counter the use of employee benefit trusts and other third party arrangements to provide tax-free rewards and loans to employees. A key aspect is that certain steps taken by third parties, such as earmarking funds or making payments, are treated as employment income of the employee. This has significantly affected common uses of employee trusts although various exclusions apply. The loan charge legislation was later introduced to tax loans made through disguised remuneration schemes before 2011. Pension schemes are impacted, for example steps taken by an employer-financed retirement benefits scheme are caught, so unapproved arrangements are affected. Share schemes have exclusions to ensure most are not caught but deferred payment arrangements using employee trusts are affected. The Rangers tax case in 2017 established loans from employee trusts are taxable remuneration. Since then HMRC has offered settlement opportunities to users of disguised remuneration schemes. This guidance explains the scope of the rules, when they apply, the types of arrangements affected and the implications. It would help tax professionals advise clients on disguised remuneration risks and opportunities to settle tax liabilities.