For a number of UK accountants and taxpayers, ‘Baxendale-Walker’ and ‘Remuneration Trust’ are familiar terms bringing renewed concern. To help you or your clients explore options for resolution, we explain HMRC’s latest activities and how we can support you.
Earlier this year, we reported how HMRC had started to issue follower notices to participants in schemes involving ‘Remuneration Trusts’ that are not yet settled.
HMRC consider these tax avoidance arrangements were mostly sold via promoters including Minerva Services Ltd and Buckingham Wealth Ltd and termed ‘Baxendale-Walker schemes’. They involve the establishment of a trust by an owner-managed company which made sizeable contributions that eventually make their way back into the hands of the owner or key management. The technical arrangements often involved complex documentation, a personal management company and a class of beneficiaries that changed over time to sidestep UK anti-avoidance legislation.
If you’re an entrepreneur or business owner-manager who participated in these complex tax avoidance schemes, it can be confusing to know how to deal with HMRC and what the options are going forward.
There are over 3,500 Baxendale-Walker schemes still unsettled with HMRC, who are now working through the cases.
HMRC’s continued crackdown
In Autumn Budget 2024 last week, the Government committed to additional HMRC resources for both enquiries and debt enforcement. Legacy avoidance schemes remain a focused part of HMRC’s activities to close the significant tax gap.
More specifically, over the coming weeks, HMRC will be sending out National Insurance Contributions (NICs) standstill agreements to all participants with unresolved Baxendale-Walker schemes that have been assessed for 2018/19 or starting County Court proceedings to protect the time limit for collecting NICs. It is important to understand what a standstill agreement is, the wider context and how to respond to HMRC in a swift and informed way.
More detail about standstill agreements
Section 8 of the Social Security Contributions Act 1999 allows HMRC to assess a historic NICs liability on an employer or an individual. Unlike taxes such as PAYE and income tax which can be protected by opening an enquiry or raising a discovery assessment, there is a six-year time limit for the collection of NICs that expires unless HMRC legally protect their position. There are two ways of doing this.
1. A County Court claim is issued by HMRC within that six years, the taxpayer files a defence and court is then requested to adjourn the proceedings until the appeal or dispute is determined. This is a costly process and HMRC usually look to pass their legal costs onto the taxpayer when matters are eventually settled.
2. Alternatively, to protect against the six-year period, HMRC may send a standstill agreement. Also referred to as a stand over agreement, this legal document sets out an agreed period where time stops for the purposes of limitation and is agreed by both HMRC and the taxpayer.
We can expect HMRC to be particularly active in the weeks ahead as they work through NIC amounts raised in the 2018/19 loan charge period that need standstill agreements or protecting in County Court.
How to react if HMRC contact you
We understand the stress that can result from being contacted by HMRC over long-running avoidance schemes. However, burying your head in the sand is never the solution.
Baxendale-Walker schemes, or other tax avoidance schemes involving disguised remuneration, are technically complex and especially challenging to resolve. If you’re contacted by HMRC, it’s vital to get specialist advice as soon as possible, so that you’re not faced with a number of different tax charges due to the entities and individuals involved and potentially high penalties.
With the right support, you’ll be able to understand your position in detail and engage with HMRC to mitigate the risk of additional tax and higher penalties.
How we can help
Our tax dispute specialists at Wilson Wright, part of BKL, have acted on behalf of a number of scheme participants to settle such legacy arrangements with HMRC. The team are familiar with the various nuances that need to be considered in concluding matters successfully.
For a confidential, no-obligation discussion on how we can help you or your client, please get in touch.
You can also directly contact our Tax Dispute Resolution Partner, Jessica McLellan, at:
+44 (0)20 7832 0444