Listen to this article
Companies must stop paying staff in gold bars as a way of avoiding tax, Revenue & Customs warned on Friday.
HMRC said a number of people were still using schemes reminiscent of the kind of tax dodges used 20 years ago, but which the tax authorities insist do not work.
“There are a few of these schemes but they have a common feature where individual claims to be paid in the form of an asset, such as gold bullion,” said HMRC.
“They have a theoretical obligation to pay the value of the asset to a trust at some point in the future — it is claimed that this obligation makes the payment non-taxable.”
Experts said the individual could then receive cash in the form of a loan, secured on the gold.
Several accountants said they were surprised that the schemes had returned. “There used to be loads of these if you go back a number of years. I remember seeing people being paid in hay, Turkish lira, wine, carpets and platinum,” said Bill Longe, the head of employer solutions at accountants RSM.
He added: “They are something I have not really seen since the mid-1990s. The legislation has moved on, as has the attitude of the courts, and the revenue has already won this battle.”
The gold bullion dodge is one of many “ disguised remuneration” schemes aimed at avoiding tax on earnings which were attacked by the March Budget in an attempt to raise £2.5bn by 2021.
Ray McCann, a partner of New Quadrant Partners and a former senior HMRC official, said gold bullion dodges are most likely to be used by “fairly big owner-managed businesses where the owner has a significant tax exposure”.
Meanwhile, Tina Riches, head of tax at Smith & Williamson, said it might suit investment bankers, or others in the City, to take “large, one-off payments” such as bonuses in gold. The rate of capital gains tax chargeable on receipt of an asset, such as gold, is lower than the 45 per cent rate of income tax applicable over the £150,000 annual threshold.
“If a promoter was doing something like this, it would be an expensive scheme, which would only make sense for people who would otherwise have a very significant tax liability,” she said.
HMRC said it would “challenge these schemes via every route open to it, including litigation through the courts”. In addition, the finance bill would introduce legislation that will come into effect from March 16 “to put the matter beyond doubt”.