Disguised remuneration trust schemes: misleading advertising (Spotlight 40)
Advertising Standards Authority rules against misleading income trust advertising that uses HMRC's logo.
HM Revenue and Customs (HMRC) complained to the Advertising Standards Authority (ASA) about misleading advertising by an avoidance scheme seller Knight Wolffe.
The scheme is known as the Knight Wolffe income trust, a type of disguised remuneration scheme, it aims to divert income from a business into a trust. The trust then loans it back to the business owners, their families, or both, claiming that no Income Tax or National Insurance Contributions (NICs) arise.
The ASA ruling
The Advertising Standards Authority has ruled that all of these claims and use of HMRC바카라 사이트檚 logo are misleading and must be withdrawn.
The ASA has also ruled that the website 바카라 사이트渕isleads by omission바카라 사이트�, by failing to mention the various government tools and policies aimed at the avoidance promoted by Knight Wolffe. This includes the General Anti-Abuse Rule (GAAR) and the new charge on disguised remuneration outstanding on 5 April 2019 (the loan charge).
The shown on the ASA website sets a precedent so other avoidance sellers must not make the same claims about similar schemes.
Knight Wolffe and other sellers of similar planning arrangement must now remove these claims from their advertising. See where advertisers fail to comply with its rulings.
How income trust schemes are claimed to work
The avoidance seller바카라 사이트檚 claims
Knight Wolffe바카라 사이트檚 website claims the scheme:
- was 바카라 사이트榢nown and accepted by HMRC since 1994바카라 사이트�
- was 바카라 사이트榓pproved by the House of Lords in 2005바카라 사이트�
- 바카라 사이트榠nvolves no tax avoidance바카라 사이트�
- remains effective in a number of ways - including alongside HMRC바카라 사이트檚 logo
HMRC view
HMRC바카라 사이트檚 understanding of the income trust scheme is that the:
- business establishes a trust for the benefit of its suppliers
- business pays money into the trust
- money paid in is claimed as a tax deductible business expense
- claimed purpose of the trust is to provide an incentive to suppliers
In reality, the suppliers aren바카라 사이트檛 aware they바카라 사이트檝e become beneficiaries of the trust. The trust funds are then loaned, usually to the business owner, their family, or both. The terms of the loan mean the funds are unlikely to be repaid.
Eventually the loans are claimed to reduce the scheme user바카라 사이트檚 estate value for Inheritance Tax purposes. As a result, the scheme user has full use of the money, which appears to be tax-free.
What to do if you바카라 사이트檙e using an income trust scheme
If you바카라 사이트檙e using this type of income trust avoidance scheme, you should contact HMRC to make arrangements to pay the tax and NICs due as soon as possible.
Updates to this page
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Changes made to highlight that the Knight Wolffe income trust scheme is a type of disguised remuneration.
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First published.