Bonus schemes and overseas pensions offered to high earners could come under scrutiny as part of a new crackdown on tax avoidance, accountants have warned.
Everyone paying the new 50 per cent top rate of income tax will soon be targeted by a special “high net worth unit” at HM Revenue & Customs. Previously, only 5,000 people were to be contacted by the government’s anti-avoidance team but this will now rise to 150,000.
The government hopes to raise a further £7bn in tax as a result of the crackdown, which was unveiled by Danny Alexander, chief secretary to the Treasury, at the Liberal Democrat party conference last week.
Since then, accountants have warned that more schemes used by high earners to mitigate tax may be outlawed. HMRC lists 10 schemes on its website that it deems “tax planning to be wary of” – but this number could rise.
Tax avoidance schemes that are routinely used by accountants to manage high earners’ tax bills have come under greater scrutiny in recent months. “These days you know that if you’re doing aggressive tax planning HMRC will clearly take a look at it,” said Francesca Lagerberg, head of tax at Grant Thornton.
She warned that overseas pension schemes used by wealthy earners who are likely to retire overseas – known as “QROPS” – could come under greater scrutiny.
Alternative retirement schemes are also at risk. Companies are now offering employee funded retirement benefit schemes (Efrbs) to high earners as an alternative to pensions, but these are being reviewed by the government.
John Whiting, tax policy director at the Chartered Institute of Taxation, warned that bonus schemes where high earners are remunerated through shares rather than cash could also be examined by the government.
Tax advisers expressed frustration at the ongoing focus on tax avoidance. “No tax adviser wants people to do anything other than pay the correct amount – but every individual has a
right to organise their affairs in a tax-efficient manner if they want to,” said James Hender at Smith & Williamson.