The £10.17m and the £3.7m & £2.0m Provision

The WPIRT is referred to in this article:

The scheme user starts by contributing to the remuneration trust (RT), with trustees based offshore. The proceeds committed to the RT are often considered administration expenses of the company from which they are transferred, reducing that company's corporation tax. The RT itself, being offshore, has no liability to corporation tax, income tax, capital gains tax or NI on any trust contributions or trust growth. Alongside this, a UK personal management company (PMC UK Ltd) is created for the scheme user, with them as director and shareholder. With this in place, the RT then gives permission for the PMC in the UK to manage the assets by way of a Fiduciary service agreement. This now gives the PMC full legal control of the assets held in the RT. The money contributed to the RT is actually paid - often minus the scheme fee (often 10%) - to the PMC. The scheme user then accesses the contribution to the RT through unsecured loans or fiduciary receipts from the PMC. This is claimed to be tax free with interest and capital repayments on the loans are rarely made. The claim is that the PMC does not own anything but controls everything, is not subject to tax, provides privacy and cannot be sued.

In many ways this is just a variation of what was a more common type of remuneration trust, the Employee Benefit Trust (EBT). The issue here is not the setting up of an offshore trust. That is perfectly legal. The issue, like with EBTs, is the manner by which the trust is used. If the user intends it as an offshore tax-free investment vehicle (taking advantage of the gross roll-up) but then pays tax on the remitted proceeds, then what has been achieved is tax deferral. This is generally ok. If the user, however, starts taking interest-free loans from the RT, via the PWC, with no intention to repay those loans, then this is often considered tax avoidance by the HMRC as no tax will ever be paid on the sums. This is something the HMRC has been clamping down on ever since the Finance Bill 2012. This has led to many EBTs being unwound but variations like the scheme above still persist.

Notably, in May this year the HMRC published a note where they took the view that "the claims made by scheme promoters about the tax savings of RTs are not credible or genuine" and "strongly advises you to withdraw from it and settle your tax affairs." Furthermore HMRC is also considering if the General anti-abuse rule (GAAR) may apply to these schemes. Transactions after 14 September 2016, where the GAAR applies, would be subject to a 60% GAAR penalty.

Given that the HMRC has been using APN (Advanced Payment Notices) to hit users of RTs will massive tax bills (forcing them to pay up even if they contest the HMRC's claim; they only get their money back if they win which could be years later ...) then I'd say that people using these schemes at this point are being rather naive/stupid.