Last time, we looked at the rise of a new tax avoidance scheme, Growth Securities Ownership Plans (GSOPs), and the attempts that HMRC has been making to stem their rise. This time we look at the risks involved for those taking part in such schemes, both employees and employers, and what you can do about them.
Risks for employees
The first risk that employees encounter when they enter into these schemes is that they are obliged to ‘pay into’ them in order to participate. This means that if specified business targets they agree to are not achieved, they run the risk of losing their money. In actuality, the risks of losing their premium are lower than the potential gains, but the risk still exists and could result in a substantial financial loss.
The second risk is that they may be obligated to reimburse their employer for any NIC and tax costs that HMRC recovers. This is a potential significant future risk for the employee, especially if they continue to take part in these and other tax avoidance schemes, either now or in the future.
HMRC has stated quite clearly that it considers these schemes to be ineffective, and it will not hesitate to act swiftly and rigorously to challenge such cases and recover any losses from the employee who has taken part in them.
Risks for employers
The risks for employers are mostly financial. Involvement with these schemes means that eventually they will have to repay the outstanding Income Tax and NIC that HMRC are owed. Daily interest will also be payable on the outstanding amounts which means that there could be a substantial amount to ultimately repay.
The other risk for employers is reputational. If they are knowingly involved in tax avoidance schemes such as GSOPs, employees may be reluctant to work for them, resulting in a loss of talent for the organisation. Additionally, HMRC will be far more scrupulous in examining their tax affairs in the future, should they be found to be involved in such schemes.
Advice for employees
If you are concerned that you may be involved in a tax avoidance scheme, or have been offered the ‘opportunity’ to join one, what can you do? Your first port of call should be HMRC, which has an information page here. There are a range of support services and advice about extricating yourself from a scheme or, more preferably, avoiding joining one in the first place.
You should also seek independent tax advice from a firm of professionals or a charity offering support.
HMRC strongly advises that you withdraw from GSOPs or similar schemes and settle your tax affairs immediately. You should make full payment of any Income Tax and NIC, plus accrued interest, to avoid further penalties.
If you’re already discussing such a scheme with a HMRC representative, you should contact them to discuss the matter further in light of the First Tier Tax Tribunal ruling.
If you have not already contacted HMRC and want advice and guidance about how to settle your tax affairs, contact the relevant department. In every case of uncertainty surrounding your tax affairs, it is better to be proactive to avoid further investigations and potential financial penalties.
In the case of you finding it difficult to settle a tax payment, contact HMRC to discuss affordable monthly payment options. HMRC will try to work with you to negotiate time to pay based on your income and expenditure, which will vary depending on your specific financial circumstances, meaning that there is no ‘standard’ time-to-pay arrangement.
You can also report tax avoidance arrangements and schemes as well as the people offering them to you here. The report will be anonymous and will not require you to give your name, address or email.