Employee Tax Avoidance Scheme blocked
The Government are taking action to prevent an artificial personal tax avoidance scheme. The avoidance tries to take advantage of reliefs that are currently available for employees and former employees. The reliefs relate to insurance to indemnify employees against employment related activities and payments where they are uninsured.
The specific tax avoidance arrangements of which the government is aware involve the use of a number of entities including both companies and trusts, some of which may be located offshore. A key element of the structure is the creation of a contrived employment, the duties of which include entering into financial arrangements (which may take the form of stock lending) with another party.
The government does not accept that this tax avoidance is technically correct, however to ensure no loss of revenue the Government is introducing legislation in the 2009 Finance Bill that will be effective from 12 January 2009. This legislation will be drafted to ensure that tax deductions will not be available where the main purpose is the avoidance of tax.
The legislation will not affect genuine cases where tax avoidance arrangements are not involved.