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Difficult choices: disguised remuneration in the context of corporate insolvency

Significant employment tax charges can arise in certain insolvency situations where there was never an intention for rewards to be provided in connection with employment, write Jon Preshaw and Ben Proctor (Jon Preshaw Tax).

The Disguised Remuneration (DR) provisions in ITEPA 2003 Part 7A were introduced in FA 2011 as a response to the proliferation of tax schemes involving payments being made by intermediaries which were claimed not to be subject to tax. HMRC estimated that there were several tens of thousands of such schemes in operation by the early 2010s and it was evident to most in the tax profession that some form of legislative action was required.

The provisions were extremely widely drafted to catch any arrangement which ‘in essence’ was intended to provide loans or any other form of reward from employment via a third party. The provisions were described as a ‘keep off the grass’...

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