Following discussions, the Inland Revenue have authorised us to publish the following clarification. The Revenue said:
"Subject to transitional provisions the rules regarding the disclosure of tax avoidance arrangements came into force on 1 August 2004. In accordance with assurances given by the Paymaster General during the Finance Bill process, we remain committed to ensuring that everyday tax advice does not trigger a disclosure obligation. From responses we have received since the revised regulations were published, we are confident that the financial product regulations are now more tightly targeted at innovative avoidance schemes.
"We discussed various issues concerning the employment product filters when we met and we agree that further work is needed to assess and ensure the effectiveness of these filters. To that end, we welcome the continuing assistance of the tax and legal professions, as well as business, in ensuring that the regulations meet the Government’s objectives and we appreciate the valuable contribution of the Chartered Institute of Taxation in this respect.
"We can confirm again that we do not intend promoters or employers to have to disclose everyday advice and arrangements. In the context of employment products this would include:
- the provision of flexible benefits, such as where employees forgo salary in return for a car or are provided with childcare vouchers
- salary sacrifice arrangements for cars, computers, childcare vouchers or pension funds (see note 1 below)
- straightforward incorporations, or dividend payments to employee shareholders
- standard dual contract arrangements (although we will require disclosure of innovative arrangements)
- the deferral of bonus payments until after the termination of the employment.
"We recognise the concern that the Institute has for its sole practitioner and smaller firm members in relation to the giving of tax advice. We confirm the assurances we have given in the past, that where a person merely provides advice as to how the tax system operates in particular circumstances then that activity on its own does not trigger a disclosure requirement on the part of the adviser.
"We are continuing to develop the guidance in these and other areas and we will be pleased to meet with you again. In the meantime we are content for this letter to be made available to your members."
Note 1: As defined in Sch 1(4)(4) of The Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations 2004.
This information is brought to you by the Technical Department (tel: 020 7235 9381).