HMRC wins disguised Remuneration avoidance case

HMRC has won a legal case over a contractor loan scheme, where they are now able to collect more than £40 million in unpaid taxes.

Hyrax Resourcing Ltd is is an accounting company incorporated on the 19th of February, 2014. The scheme sought to deliver the users rewards from their work through a trust arrangement. The individuals which were involved in this trust agreement would receive an incredibly small salary, but then would receive the rest of their money through loans from an offshore trust. This arrangement was intended to avoid the tax which should’ve been on their income. This meant that employees were receiving full income, whilst dodging taxes. The tax department said the Hyrax scheme was a successor to the K2 arrangements, which was widely reported on in 2012 for having had comedian Jimmy Carr as a member.

Hyrax Resourcing Ltd accepted applications from users, created employment contacts, signed service contracts and then paid the employees in loans. The FTT said it was clear that the scheme was marketed and sold on the basis of its tax advantage, this being the main benefit from the arrangement.

Now, Hyrax Resourcing Ltd will be required to disclose details of the tax avoidance scheme. This includes the names and addresses of the 1,180 individuals who were employed. Failure to do so could result in a further £6m penalty – £5,000 per client –plus £5,000 per day for non-disclosure. HMRC are now able to collect more than £40 million unpaid taxes from Hyrax Resourcing Ltd.

Financial Secretary to the Treasury, Mel Stride MP, said “HMRC is cracking down on the unscrupulous promoters who sell these highly contrived tax avoidance loan schemes”

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