The UK government’s HM Revenue & Customs (HMRC) has issued a tax avoidance alert regarding a scheme marketed as a tax planning option for funding education fees. This alert, known as HMRC Spotlight 62, specifically targets individuals who are directors and main shareholders of owner-managed companies. It highlights the scheme’s potential risks and asserts that it does not work within the framework of tax regulations.
The content can be divided into the following paragraphs:
1. Introduction:
HMRC is aware of a tax avoidance scheme marketed as a tax planning option for funding education fees. It targets directors and main shareholders of owner-managed companies.
2. Explanation of the Scheme:
The scheme aims to divert dividend income from company owners to their minor children to avoid taxes. It involves issuing new shares, purchasing them below market value, gifting them to a trust, and voting for substantial dividend payments.
3. HMRC’s View:
HMRC states that this scheme does not work and is covered by anti-avoidance legislation. They mention specific legislation that prevents such arrangements from providing the desired tax advantage.
4. Advice for Participants:
Individuals involved in this or similar schemes are advised to withdraw from them and settle their tax affairs. HMRC offers support and encourages contacting them for assistance.
5. Advice for Promoters:
Scheme promoters must comply with disclosure regulations, which can result in penalties. HMRC emphasizes their commitment to pursuing promoters and enablers of tax avoidance.
6. Reporting Schemes:
Individuals can report tax avoidance arrangements and the individuals promoting them to HMRC through an online form or by phone. The option for anonymous reporting is highlighted.
It is important to note that the information provided in this summary is for informative purposes only. It is not intended as legal or tax advice. If you have any concerns or require specific advice regarding your tax situation, consulting with a qualified tax expert or advisor is strongly recommended. They will be able to provide accurate and tailored guidance based on your individual circumstances.
If you require guidance in navigating the complexity of your specific circumstances, Guru Accountancy can provide the assistance you need. They are experienced in addressing such complexities and can offer valuable support in navigating through them.
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Source: https://www.gov.uk/guidance/dividend-diversion-scheme-used-to-fund-education-fees-spotlight-62