HMRC consults informally on new DOTAS hallmarks, including one for growth share schemes | Practical Law

HMRC consults informally on new DOTAS hallmarks, including one for growth share schemes | Practical Law

HMRC has sent a discussion document on new hallmarks under the disclosure of tax avoidance schemes regime to certain tax practitioner representatives. It has not been published on HMRC's website. The discussion document includes HMRC's current position on a hallmark for employment income avoidance schemes, including Part 7A avoidance schemes and growth share schemes. (Free access.)

HMRC consults informally on new DOTAS hallmarks, including one for growth share schemes

Practical Law UK Legal Update 3-507-1038 (Approx. 3 pages)

HMRC consults informally on new DOTAS hallmarks, including one for growth share schemes

by PLC Share Schemes & Incentives
Published on 01 Aug 2011 • England, Wales
HMRC has sent a discussion document on new hallmarks under the disclosure of tax avoidance schemes regime to certain tax practitioner representatives. It has not been published on HMRC's website. The discussion document includes HMRC's current position on a hallmark for employment income avoidance schemes, including Part 7A avoidance schemes and growth share schemes. (Free access.)
HM Revenue & Customs (HMRC) has circulated a discussion document on new and extended hallmarks under the disclosure of tax avoidance schemes regime (DOTAS) to certain tax practitioner representatives. HMRC has not published the paper, dated 22 June 2011, on its website, but recently made the paper available to PLC (a link to a pdf version is provided below). The paper sets out HMRC's current position on new or revised hallmarks relating to employment income schemes, discussed in this update. The document also deals with offshore schemes and loss schemes, and a proposal to withdraw the existing DOTAS hallmark for pensions (for more information on these aspects of the consultation, see PLC Tax, Legal update, Informal HMRC consultation on DOTAS hallmarks).
HMRC previously consulted on introducing a new hallmark for employment income and "income to capital" schemes (see Legal updates, 2011 Budget: tax developments relevant to share schemes: Disclosure of tax avoidance schemes: employment income hallmarks and Disclosure of tax avoidance schemes: HMRC announce timetable for new employment income and income-to-capital hallmarks). Respondents to the previous consultation thought that the proposed employment income hallmarks were too widely drawn and would catch many innocent incentives schemes. HMRC therefore now proposes to produce a positive list of employment income schemes which must be disclosed, rather than a broad set of hallmarks with a list of exceptions.
HMRC is particularly interested in obtaining disclosures about employment income schemes:
  • That aim to circumvent Part 7A of the Income Tax (Earnings and Pensions) Act 2003 (Part 7A), which sets out anti-avoidance legislation in relation to remuneration provided to employees through third parties such as employee benefit trusts (see Practice note, Disguised remuneration: Part 7A of the Income Tax (Earnings and Pensions) Act 2003).
  • That use "growth shares", described in paragraph 4.8 of the paper as schemes which:
    "involve a class of shares, not available to ordinary investors, whose rights are such that they have a low value at issue, or acquisition, but potential for significant appreciation if the company grows in value."
    HMRC is concerned that the use of growth shares may increase in response to the enactment of Part 7A. (For more information about growth shares, see Practice note, Growth shares and hurdle shares.)
For more information on DOTAS, see PLC Tax, Practice note, Direct tax disclosure regime.
Source: HMRC discussion paper: Disclosure of Tax Avoidance Schemes (DOTAS): "Hallmarks", 22 June 2011.
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