Simplification of the tax and National Insurance treatment of termination payments - CIOT comments
The consultation document proposes changes targeted at Disguised Remuneration (DR) avoidance schemes. In particular, changes are proposed to
Put beyond doubt that all loans or debts from a Disguised Remuneration (DR) which result in a loan or other debt being owed by an employee to a third party are within the DR rules;
broaden HMRC‚ s transfer of debt powers, contained in the PAYE Regulations, to that in specific circumstances a DR liability can be transferred from the employer to the employee (or former employee);
impose a bar to a Corporation Tax deduction for contributions to DR schemes made on or after 6 April 2017; and
impose a new charge on outstanding DR loans to that they will be subject to PAYE and NIC as earnings if they haven‚ t already been fully taxed or repaid on or before 5 April 2019.
In our response we comment that while the CIOT has no issues, in principle, with government targeting artificial avoidance arrangements this is subject to the proviso that (a) there is no collateral damage to normal commercial arrangements and (b) the legislation is clear, easy to follow and necessary. In this instance what is proposed is to revisit historic transactions ‚ legacy loans ‚ and tax them differently (the legislation effectively imposes a retrospective tax charge on events that happened in the past). Consequently, we think extreme care is required to distinguish between the good and the bad, so that the new legislation does not catch ‚ desirable‚ arrangements. For example, where legacy loans support share plans for employees employed by unlisted companies and which the Government has hitherto encouraged.