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What is the Legal Status of Disguised Remuneration Loan Schemes
Source: WhatDoTheyKnow
Authority: HM Revenue and Customs
Status: Waiting for an
internal review
by
HM Revenue and Customs
of their handling of this request.
Imported path: /opt/loancharge/imports/wdtk/requests/what_is_the_legal_status_of_disg
Open original request on WhatDoTheyKnow
Imported text
SOURCE: WhatDoTheyKnow
SOURCE_URL: https://www.whatdotheyknow.com/request/what_is_the_legal_status_of_disg
TITLE: What is the Legal Status of Disguised Remuneration Loan Schemes
AUTHORITY: HM Revenue and Customs
AUTHORITY_URL: https://www.whatdotheyknow.com/body/hmrc
STATUS: Waiting for an
internal review
by
HM Revenue and Customs
of their handling of this request.
REQUEST_SLUG: what_is_the_legal_status_of_disg
CAPTURED_AT: 2026-05-19T07:24:36+00:00
PROVENANCE: {"first_seen_at": "2026-05-18T12:51:34", "first_seen_page": "2", "first_query_term": "\"Loan Charge\"", "first_date_after": "2018/01/01", "first_date_before": "2019/01/01", "matched_query_terms": "\"Loan Charge\" | \"disguised remuneration\"", "matched_date_ranges": "2018/01/01 to 2019/01/01", "first_search_url_template": "https://www.whatdotheyknow.com/search/%22Loan%20Charge%22/requests?commit=Filter&query=%22Loan+Charge%22&request_date_after=2018%2F01%2F01&request_date_before=2019%2F01%2F01&request_variety%5B%5D=sent&request_variety%5B%5D=response&request_variety%5B%5D=comment&sortby=&utf8=%E2%9C%93&page="}
ATTACHMENTS:
- FOI2018_01672_Final.pdf | https://www.whatdotheyknow.com/request/what_is_the_legal_status_of_disg/response/1222759/attach/2/FOI2018%2001672%20Final.pdf?cookie_passthrough=1 | application/pdf | 239976 bytes
- [not downloaded] | https://www.whatdotheyknow.com/request/what_is_the_legal_status_of_disg/response/1222759/attach/html/2/FOI2018%2001672%20Final.pdf.html | | 0 bytes
- IR2018_01948_Stephen_Smith.pdf | https://www.whatdotheyknow.com/request/what_is_the_legal_status_of_disg/response/1249607/attach/2/IR2018%2001948%20Stephen%20Smith.pdf?cookie_passthrough=1 | application/pdf | 126203 bytes
- [not downloaded] | https://www.whatdotheyknow.com/request/what_is_the_legal_status_of_disg/response/1249607/attach/html/2/IR2018%2001948%20Stephen%20Smith.pdf.html | | 0 bytes
- FOI2018_02272_Stephen_Smith.pdf | https://www.whatdotheyknow.com/request/what_is_the_legal_status_of_disg/response/1261770/attach/2/FOI2018%2002272%20Stephen%20Smith.pdf?cookie_passthrough=1 | application/pdf | 120073 bytes
- [not downloaded] | https://www.whatdotheyknow.com/request/what_is_the_legal_status_of_disg/response/1261770/attach/html/2/FOI2018%2002272%20Stephen%20Smith.pdf.html | | 0 bytes
- [not downloaded] | https://ico.org.uk/media/action-weve-taken/decision-notices/2019/2614517/fs50800934.pdf | | 0 bytes
================================================================================
MESSAGE 1 [outgoing]
HEADER: Stephen Smith
1 August 2018
Delivered
--------------------------------------------------------------------------------
Dear HM Revenue and Customs,
In a letter dated July 2018 it states the following:
"DR Schemes are artificial arrangements that pay a carefully calculated amount through the payroll; just enough to give enough to give the employee entitlement to state pension credits, and make full use of their personal allowance so that little, or no, tax is paid. Most of their income is paid in the form of loans, often routed through an offshore trust. Loans are not taxable, but these are loans in name only. They are usually given interest free and allegedly repayable on demand, but there is no intention to repay them and they are not repaid. HMRC has proven in court that they are taxable as earnings, but no income tax and NICs were paid at the time"
Please can you answer these questions to enable my full understanding of the legal status of such schemes:
1) Please can you provide a full list of schemes that you are aware of and if at anytime they were considered by HMRC legal representatives to be
1a) Legal under UK LAW (i.e not illegal)
1b) Illegal under UK LAW
1c) Are still legal under UK LAW as of the date of this request
1d) Have since been made illegal under UK LAW as of <given date>
Yours faithfully,
Stephen A Smith
================================================================================
MESSAGE 2 [incoming]
HEADER: foi.team@hmrc.gsi.gov.uk on behalf of FOI Central Team,
HM Revenue and Customs
1 August 2018
--------------------------------------------------------------------------------
Our ref: FOI2018/01672
Dear Stephen Smith,
Freedom of Information Act 2000 Acknowledgement
Thank you for your communication of 1st August which has been passed to
HMRC's Freedom of Information Team.
We have allocated the above reference which you should quote if you need
to contact us.
The Team will arrange for a reply to be sent to you which will either
comply with HMRC's obligations under Freedom of Information Act or, if we
think it's an enquiry that we don't need to address under the terms of the
Act, let you know why. If it is the latter we will, if possible, pass it
on to a more appropriate part of the Department for answer.
Yours sincerely
HMRC Freedom of Information Act Team
================================================================================
MESSAGE 3 [incoming]
HEADER: foi.team@hmrc.gsi.gov.uk on behalf of FOI Central Team,
HM Revenue and Customs
30 August 2018
--------------------------------------------------------------------------------
1 Attachment
FOI2018 01672 Final.pdf
234K
View
Download
Dear Mr Smith,
I am writing in response to your request for information, received 1
August 2018.
Yours sincerely,
HMRC Freedom of Information Team
================================================================================
MESSAGE 4 [outgoing]
HEADER: Stephen Smith
30 August 2018
Delivered
--------------------------------------------------------------------------------
Dear HM Revenue and Customs,
Please pass this on to the person who conducts Freedom of Information reviews.
I am writing to request an internal review of HM Revenue and Customs's handling of my FOI request 'What is the Legal Status of Disguised Remuneration Loan Schemes'.
I am disappointed with this response based on two key pieces of information
1) have in my possession an additional letter (Mar2018) from HMRC Counter Avoidance, Ministerial Complaints Division SO483 that states "This does not mean to say that these schemes are illegal"
2) On 3 July 2018 Mel J Stride addressed parliament indicating they were not legal:
Extract from Hansard 3/7/18
Peter Aldous (Waveney) (Con)
To follow on from the question asked by the hon. Member for Eastbourne (Stephen Lloyd), the retrospective nature of the 2019 loan charge could bankrupt thousands of people. Will the Government revise legislation to ensure that that does not happen, with the loan charge only applying to disguised remuneration loans made after the passing of the Finance (No. 2) Act 2017?
Mel Stride
This is not retrospective legislation. The activities and arrangements entered into by those who are in scope of this measure were not legal when they were entered into, even though they may have been entered into in the past. The loan charge is there not to apply penalties for that behaviour, but to ensure that those individuals pay the right amount of tax.
End of extract
With this in mind it is clearly in the public interest know if schemes were legal or not.
A full history of my FOI request and all correspondence is available on the Internet at this address:
https://www.whatdotheyknow.com/request/w...
Yours faithfully,
Stephen Smith
================================================================================
MESSAGE 5 [incoming]
HEADER: foi.team@hmrc.gsi.gov.uk on behalf of FOI Central Team,
HM Revenue and Customs
3 September 2018
--------------------------------------------------------------------------------
Our ref: IR2018/01948
Dear Mr Smith,
Freedom of Information Act 2000 Acknowledgement
Thank you for your communication of 30th August which has been passed to
HMRC's Freedom of Information Team.
We have allocated the above reference which you should quote if you need
to contact us.
The Team will arrange for a reply to be sent to you which will either
comply with HMRC's obligations under Freedom of Information Act or, if we
think it's an enquiry that we don't need to address under the terms of the
Act, let you know why. If it is the latter we will, if possible, pass it
on to a more appropriate part of the Department for answer.
Yours sincerely
HMRC Freedom of Information Act Team
================================================================================
MESSAGE 6 [outgoing]
HEADER: Stephen Smith
19 September 2018
Delivered
--------------------------------------------------------------------------------
Dear [
email address
] on behalf of FOI Central Team,
Please can you explain what the delay is in providing this internal review
Yours sincerely,
Stephen Smith
================================================================================
MESSAGE 7 [outgoing]
HEADER: Stephen Smith
14 October 2018
Delivered
--------------------------------------------------------------------------------
Dear [
email address
] on behalf of FOI Central Team,
Complaint about HMRC's FOI avoidance now made to ICO
Yours sincerely,
Stephen Smith
================================================================================
MESSAGE 8 [incoming]
HEADER: foi.team@hmrc.gsi.gov.uk on behalf of FOI Central Team,
HM Revenue and Customs
15 October 2018
--------------------------------------------------------------------------------
1 Attachment
IR2018 01948 Stephen Smith.pdf
123K
View
Download
Dear Mr Smith
I am writing in response to your request for information, received 30
August 2018.
Yours sincerely,
HMRC Freedom of Information Team
================================================================================
MESSAGE 9 [outgoing]
HEADER: Stephen Smith
15 October 2018
Delivered
--------------------------------------------------------------------------------
Dear [
email address
] on behalf of FOI Central Team,
Thank you for your inconclusive response to my ask; I will await the ICO review of this request. Noting their desire for transparency.
Yours sincerely,
Stephen Smith
================================================================================
MESSAGE 10 [outgoing]
HEADER: Stephen Smith
16 October 2018
Delivered
--------------------------------------------------------------------------------
Dear [
email address
] on behalf of FOI Central Team,
Noting HMRC FOI Team are refusing to provide information based on the comment
[ I have decided that s.23(1) of the CRCA is satisfied and consequently s.44 of the FOIA is engaged.]
I find it difficult to understand why a government department who work with numbers every day cannot give an answer with numbers - that do no identify individuals
Might I suggest
1) Please can you provide a full list of schemes that you are aware of and if at anytime they were considered by HMRC legal representatives to be
Example answer
HMRC ARE AWARE OF <number of schemes in total> split DOTAS & NON_DOTAS
1a) Legal under UK LAW (i.e not illegal)
<number legal> ... again split dots and non dotas
1b) Illegal under UK LAW
<number illegal> ... again split dots and non dotas
1c) Are still legal under UK LAW as of the date of this request
<number still legal> ... again split dots and non dotas
1d) Have since been made illegal under UK LAW as of <given date>
<Number Made illegal and date> ... again split dots and non dotas
I welcome this breakdown - noting you have the information I expect a quicker response
Yours sincerely,
Stephen Smith
================================================================================
MESSAGE 11 [incoming]
HEADER: foi.team@hmrc.gsi.gov.uk on behalf of FOI Central Team,
HM Revenue and Customs
17 October 2018
--------------------------------------------------------------------------------
Our ref: FOI2018/02272
Dear Stephen Smith,
Freedom of Information Act 2000 Acknowledgement
Thank you for your communication of 16th October which has been passed to
HMRC's Freedom of Information Team.
We have allocated the above reference which you should quote if you need
to contact us.
The Team will arrange for a reply to be sent to you which will either
comply with HMRC's obligations under Freedom of Information Act or, if we
think it's an enquiry that we don't need to address under the terms of the
Act, let you know why. If it is the latter we will, if possible, pass it
on to a more appropriate part of the Department for answer.
Yours sincerely
HMRC Freedom of Information Act Team
================================================================================
MESSAGE 12 [outgoing]
HEADER: Stephen Smith
7 November 2018
Delivered
--------------------------------------------------------------------------------
Dear [
email address
] on behalf of FOI Central Team,
THIS IS NOW VERY SERIOUS
The Rt Hon Philip Hammond and The Rt Hon Mel J Stride have both indicated that the schemes are illegal without any documented evidence before the House of Lords : without HMRC proving otherwise I can only be lead to being branded a Criminal and therefore cannot work to pay HMRC anything they estimate to be due
It is imperitive that these two individuals are correctly informed as well as the public like myself. If HMRC have failed in there duties then admit to it do not bury it and cause the financial uncertainty of ‘00,000s of people including those families whose have been impacted my way of Mental Health and in sone circumstances SUICIDE.
At the very least STOP THE LOAN CHARGE NOW
Yours sincerely,
Stephen Smith
================================================================================
MESSAGE 13 [incoming]
HEADER: foi.team@hmrc.gsi.gov.uk on behalf of FOI Central Team,
HM Revenue and Customs
8 November 2018
--------------------------------------------------------------------------------
1 Attachment
FOI2018 02272 Stephen Smith.pdf
117K
View
Download
Dear Mr Smith
I am writing in response to your request for information, received 8
November 2018.
Yours sincerely,
HMRC Freedom of Information Team
================================================================================
MESSAGE 14 [outgoing]
HEADER: Stephen Smith
16 January 2019
Delivered
--------------------------------------------------------------------------------
Dear [
email address
] on behalf of FOI Central Team,
For the benefit of anybody following the FOI Request. It is currently in the hands of ICO who have been provided all of the relevant links from the House of Lords and Finance Bill 2018 : NC26.
Alternatively you could simply answer the questions in a transparent manner.
Yours sincerely,
Stephen Smith
================================================================================
MESSAGE 15 [outgoing]
HEADER: Stephen Smith
6 February 2019
Delivered
--------------------------------------------------------------------------------
Dear [
email address
] on behalf of FOI Central Team,
Still Waiting :
Yours sincerely,
Stephen Smith
================================================================================
MESSAGE 16 [outgoing]
HEADER: Stephen Smith
19 March 2019
Delivered
--------------------------------------------------------------------------------
Dear [
email address
] on behalf of FOI Central Team,
I have received the following decision notice from ICO
https://ico.org.uk/media/action-weve-tak...
I welcome the opportunity to determine how this information can be made public without exposing the individuals / schemes per se.
Yours sincerely,
Stephen Smith
================================================================================
ATTACHMENT TEXT EXTRACTION / OCR
================================================================================
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ATTACHMENT: FOI2018_01672_Final.pdf
TEXT_FILE: FOI2018_01672_Final.pdf.txt
METHOD: pdf_native
OCR_USED: False
PAGES: 3
--------------------------------------------------------------------------------
--- PDF page 1 ---
Information is available in large print, audio and Braille formats.
Text Relay service prefix number – 18001
Counter-Avoidance
Freedom of Information Team
S1715
6 Floor
Central Mail Unit
Newcastle Upon Tyne
NE98 1ZZ
Stephen Smith
By email: request-504699-
01c93a24@whatdotheyknow.com
Email
foi.request@hmrc.gsi.gov.uk
Web
www.gov.uk
Date: 30 August 2018
Our ref:
FOI2018/01672
Dear Mr Smith
Freedom of Information Act 2000 (FOIA)
Thank you for your request, which was received on 1 August, for the following information in
respect of Disguised Remuneration (DR) avoidance schemes:
“Please can you answer these questions to enable my full understanding of the legal status
of such schemes:
1) Please can you provide a full list of schemes that you are aware of and if at any time they
were considered by HMRC legal representatives to be
1a) Legal under UK LAW (i.e not illegal)
1b) Illegal under UK LAW
1c) Are still legal under UK LAW as of the date of this request
1d) Have since been made illegal under UK LAW as of <given date>”
In response to the first part of your enquiry I can confirm that HMRC hold information within
the scope of your request but consider disclosure of this information is exempt under section
31(1)(d) of the FOIA.
Section 31 states:
31.(1) Information which is not exempt information by virtue of section 30 is exempt
information if its disclosure under this Act would, or would be likely to, prejudice –
(d) the assessment or collection of any tax or duty or of any imposition of a
similar nature,
Disclosure of information about the schemes HM Revenue and Customs (HMRC) are aware
of which have used Disguised Remuneration arrangements (DR) would be likely to
undermine the compliance activity which HMRC undertakes and therefore would prejudice
the assessment and collection of tax.
Releasing the information requested could prejudice and influence the behaviours of DR
scheme users to pursue litigation or avoid settling their tax affairs in an ongoing enquiry
thereby delaying the proper assessment and collection of tax at risk. Furthermore, if we put
information about our compliance regime and risks in the public domain it would allow those
individuals intent on abusing the system to arrange their affairs or rehearse arguments to
cause delay to HMRC’s compliance activities and/or avoid paying tax. For these reasons we
conclude there is a real and probable risk to our ability to assess and collect tax and the
exemption applies.
--- PDF page 2 ---
2
Section 31 is a prejudice-based exemption and having concluded that disclosure would be
likely to prejudice the assessment and collection of tax, we will now consider the public
interest test.
There is a strong public interest in HMRC being accountable for its performance and that it is
as transparent as possible about how successful it is tackling tax avoidance.
Providing the information requested would, on the face of it reassure the public, that our
activities to tackle and defeat tax avoidance arrangements are fair, robust and applied
equitably. This would increase the public’s confidence in such activities but take into account
that litigious action taken in the courts and tax tribunals is a matter of public record. It should
also be noted that the department is subject to review by external bodies such as the
National Audit Office, the Adjudicators Office and on an individual level the Appeal
Commissioners. Additionally, HMRC activities are also subject to public scrutiny by the
Treasury Select Committee (TSC) and Parliamentary Accounts Committee (PAC) so the
public interest in our accountability is met by the oversight of these bodies.
There is however, considerable public interest in the measures HMRC takes in tackling tax
avoidance and the additional revenue collected through this. We feel that the level of public
scrutiny currently in place satisfies the public interest for transparency and accountability.
As the UK’s tax, payments and customs authority, HMRC needs to secure the revenue to
the Exchequer to help pay for essential public services.
On balance we conclude the public interest to favour maintaining the exemption at section
31(d) of the FOIA.
Tax avoidance often involves contrived, artificial transactions that serve little or no purpose
than to produce this advantage. It involves operating within the letter – but not the spirit – of
the law. Most tax avoidance schemes simply do not work and those who engage in it can
find they pay more than the tax they attempted to save once HMRC has successfully
challenged them. You might like to know that HMRC wins around 90% of tax avoidance
cases that taxpayers chose to take to court or the tribunal, with many more settling before
that stage.
Where challenges are considered by the tax tribunal and courts their decision as to whether
the intended tax result was achieved or not is a matter of public record. For example, it is the
view of HMRC that DR schemes have never been effective and a number of court
successes support this view. The most well-known judgment was the unanimous Supreme
Court decision in favour of HMRC in the Rangers Football Club case. Further information is
available at: www.gov.uk/guidance/disguised-remuneration-a-supreme-court-decision-
spotlight-41.
Information and guidance about how to recognise a Disguised Remuneration tax avoidance
scheme is available at: www.gov.uk/government/collections/tax-avoidance-disguised-
remuneration
You also might like to be aware that HMRC publishes a quarterly list of ‘schemes reference
numbers’ (SRN) where tax avoidance schemes have been declared under the ‘Disclosure of
Tax Avoidance Schemes (DOTAS) regime. Users of these arrangements are required to
enter the SRN on their tax return and should be aware they have used a scheme that may
be challenged by HMRC. Further information is available at:
www.gov.uk/government/publications/tax-avoidance-schemes-on-which-accelerated-
payments-may-be-charged-by-hmrc
If you are not satisfied with this reply you may request a review within two months by
emailing foi.review@hmrc.gsi.gov.uk, or by writing to the address at the top right-hand side
of this letter.
--- PDF page 3 ---
3
If you are not content with the outcome of an internal review, you can make a complaint to
the Information Commissioner’s Office (ICO). Instructions about this process are available at
the following link: https://ico.org.uk/concerns/
Yours sincerely,
Freedom of Information Team
--------------------------------------------------------------------------------
ATTACHMENT: FOI2018_02272_Stephen_Smith.pdf
TEXT_FILE: FOI2018_02272_Stephen_Smith.pdf.txt
METHOD: pdf_native
OCR_USED: False
PAGES: 2
--------------------------------------------------------------------------------
--- PDF page 1 ---
Information is available in large print, audio and Braille formats.
Text Relay service prefix number – 18001
Freedom of Information Team
S1715
6 Floor
Central Mail Unit
Newcastle Upon Tyne
NE98 1ZZ
Stephen Smith
By email: request-504699-
01c93a24@whatdotheyknow.com
Email
foi.request@hmrc.gsi.gov.uk
Web
www.gov.uk
Date: 8 November 2018
Our ref:
FOI2018/02272
Dear Stephen Smith
Freedom of Information Act 2000 (FOIA)
Thank you for your request, which was received on 16 October, for the following information:
“Example answer
HMRC ARE AWARE OF <number of schemes in total> split DOTAS & NON_DOTAS
1a) Legal under UK LAW (i.e not illegal) <number legal> ... again split dots and non dotas
1b) Illegal under UK LAW
<number illegal> ... again split dots and non dotas
1c) Are still legal under UK LAW as of the date of this request <number still legal> ... again
split dots and non dotas
1d) Have since been made illegal under UK LAW as of <given date> <Number Made illegal
and date> ... again split dots and non dotas”
In line with your previous FOI request, we have assumed you are seeking information about
disguised remuneration (DR) schemes. If this is not the case please let us know.
HMRC is aware of over 250 DR schemes, around 50% of these schemes are disclosed
under the Disclosure of Tax Avoidance Schemes (DOTAS) regime.
With regards to the legality of these schemes, as previously advised, tax avoidance involves
operating within the letter, but not the spirit, of the law. Schemes involve bending the rules of
the tax system to gain a tax advantage that Parliament never intended.
These schemes often involve artificial or contrived arrangements. A disguised remuneration
scheme that pays loans in place of ordinary remuneration (often via an offshore entity) is an
example of tax avoidance.
It is HMRC’s view that the law did not allow the tax consequences disguised remuneration
schemes claimed to achieve. Where a scheme doesn’t work, the tax legally due should be
paid.
HMRC has always maintained that avoidance schemes do not work and has consistently
challenged their use. HMRC will challenge avoidance schemes on the basis that they either
don’t work or do not achieve their intended tax results. Where the courts agree with us they
do not declare the scheme illegal simply that it does not achieve the intended tax results.
--- PDF page 2 ---
2
Further information about terminology is available on GOV.UK at:
https://www.gov.uk/government/publications/tackling-tax-evasion-and-avoidance (page 5 -
box 1.A: Clarifying tax terminology).
Outside of the FOIA
DOTAS was introduced by the Finance Act 2004. Under the DOTAS rules, the promoter of a
tax scheme has to notify HMRC where a scheme contains various hallmarks of tax
avoidance. If a scheme has been notified under DOTAS rules it does not in any way signify
that it has been approved by HMRC. Quite the contrary – it is intended to put people on
notice that a scheme may well be challenged by HMRC.
Further information about DOTAS is available on GOV.UK at:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_da
ta/file/701190/DOTAS-March.pdf
If you are not satisfied with this reply you may request a review within two months by
emailing foi.review@hmrc.gsi.gov.uk, or by writing to the address at the top right-hand side
of this letter.
If you are not content with the outcome of an internal review, you can make a complaint to
the Information Commissioner’s Office (ICO). Instructions about this process are available at
the following link: https://ico.org.uk/concerns/
Yours sincerely,
Freedom of Information Team
--------------------------------------------------------------------------------
ATTACHMENT: IR2018_01948_Stephen_Smith.pdf
TEXT_FILE: IR2018_01948_Stephen_Smith.pdf.txt
METHOD: pdf_native
OCR_USED: False
PAGES: 4
--------------------------------------------------------------------------------
--- PDF page 1 ---
Information is available in large print, audio and Braille formats.
Text Relay service prefix number – 18001
Counter-Avoidance
Freedom of Information Team
6 Floor
Central Mail Unit
Newcastle Upon Tyne
NE98 1ZZ
Mr Stephen Smith
By email: request- 504699-01c93a24
@whatdotheyknow.com
Email
foi.request@hmrc.gsi.gov.uk
Web
www.gov.uk
Date: 15 October 2018
Our ref:
IR2018/01948
Dear Mr Smith
Freedom of Information Act 2000 (FOIA)
Thank you for your email of 30 August 2018 asking HMRC to carry out an internal review of
our response to your request for information under the FOIA.
Original Request
On 1 August 2018, we received your request for the following information:
"DR Schemes are artificial arrangements that pay a carefully calculated amount through the
payroll; just enough to give enough to give the employee entitlement to state pension
credits, and make full use of their personal allowance so that little, or no, tax is paid. Most of
their income is paid in the form of loans, often routed through an offshore trust. Loans are
not taxable, but these are loans in name only. They are usually given interest free and
allegedly repayable on demand, but there is no intention to repay them and they are not
repaid. HMRC has proven in court that they are taxable as earnings, but no income tax and
NICs were paid at the time"
Please can you answer these questions to enable my full understanding of the legal status
of such schemes:
1) Please can you provide a full list of schemes that you are aware of and if at anytime they
were considered by HMRC legal representatives to be
1a) Legal under UK LAW (i.e not illegal)
1b) Illegal under UK LAW
1c) Are still legal under UK LAW as of the date of this request
1d) Have since been made illegal under UK LAW as of <given date>
Initial Response
We responded to your request on 30 August 2018 confirming that HMRC holds information
within the scope of your request. It was withheld under section 31(1)(d) of the FOIA.
Request for Internal Review
You have asked for a review of our decision dated 30 August 2018 with regard to:
I am writing to request an internal review of HM Revenue and Customs's handling of my FOI
request 'What is the Legal Status of Disguised Remuneration Loan Schemes'.
--- PDF page 2 ---
2
I am disappointed with this response based on two key pieces of information
1) have in my possession an additional letter (Mar2018) from HMRC Counter Avoidance,
Ministerial Complaints Division SO483 that states "This does not mean to say that these
schemes are illegal"
2) On 3 July 2018 Mel J Stride addressed parliament indicating they were not legal:
Extract from Hansard 3/7/18
Peter Aldous (Waveney) (Con)
To follow on from the question asked by the hon. Member for Eastbourne (Stephen Lloyd),
the retrospective nature of the 2019 loan charge could bankrupt thousands of people. Will
the Government revise legislation to ensure that that does not happen, with the loan charge
only applying to disguised remuneration loans made after the passing of the Finance (No. 2)
Act 2017?
Mel Stride
This is not retrospective legislation. The activities and arrangements entered into by those
who are in scope of this measure were not legal when they were entered into, even though
they may have been entered into in the past. The loan charge is there not to apply penalties
for that behaviour, but to ensure that those individuals pay the right amount of tax.
End of extract
With this in mind it is clearly in the public interest know if schemes were legal or not.
Internal Review
The purpose of an Internal Review is to assess how your FOI request was handled in the
first instance and to determine whether the original decision given to you was correct.
In line with the Cabinet Office Freedom of Information Code of Practice I can confirm that I
have not had any involvement in the initial response to your request and have undertaken a
fair and thorough review of procedures and decisions taken in relation to the Act.
We received your request on 1 August 2018 and responded by email 30 August 2018. This
was within the statutory deadline in compliance with section 10(1) of the FOIA.
The response also set out HMRC’s review procedure and your right to complain to the
Information Commissioner, as required by section 17(7) of the FOIA.
Considerations
In reconsidering your request I have addressed your concerns in two parts, a list of known
disguised remuneration schemes and the legality of these.
The first part was interpreted as a request for a comprehensive list of the names of all known
disguised remuneration schemes.
Whilst I can confirm that HMRC does hold information within the scope of your request I find
it to be exempt from disclosure under section 44(1)(a) FOIA.
Section 44 of FOIA states that:
Information is exempt information if its disclosure (otherwise that under this Act) by the
public authority holding it –
a) is prohibited by or under any enactment,
b) is incompatible with any Community obligation, or
--- PDF page 3 ---
3
c) would constitute or be punishable as a contempt of court.
The enactment in this case is the Commissioners of Revenue and Customs Act 2005 (the
CRCA).
Section 18(1) of the CRCA states that HMRC officials may not disclose information which is
held by HMRC in connection with one of its functions.
Section 19 of the CRCA makes it a criminal offence for any member of staff to disclose such
information.
For the purposes of FOIA, section 18(1) only acts as a statutory prohibition where section
23(1) of the CRCA is also satisfied.
Section 23 provides that the section 44 exemption will apply where disclosure –
a) would specify the identity of the person to whom the information relates, or
b) would enable the identity of such a person to be deduced.
The first thing to consider is, if the information is held by HMRC in connection with one of its
functions.
You have requested a list of disguised remuneration schemes known to HMRC, I therefore
consider this information to be held in connection with HMRC’s function of assessing and
collecting of tax.
I have now gone on to consider whether disclosure of the information held would satisfy the
requirements of s.23(1) of the CRCA by either specifying the identity of a person the
information relates to or allowing the identity of such a person to be deduced.
It is important to note that in this context ‘person’ includes both natural persons and legal
entities. Your request requires HMRC to provide a list of relevant ‘persons’.
Therefore, I have decided that s.23(1) of the CRCA is satisfied and consequently s.44 of the
FOIA is engaged.
As I am unable to comply with the first part of your request I am unable to provide the further
breakdown you have requested which I consider to be the second part of your request.
Despite being unable to comply with your request, I can advise that tax avoidance involves
operating within the letter, but not the spirit, of the law. Schemes involve bending the rules of
the tax system to gain a tax advantage that Parliament never intended. These schemes
often involve artificial or contrived arrangements. A disguised remuneration scheme that
pays loans in place of ordinary remuneration (often via an offshore entity) is an example of
tax avoidance.
It is HMRC’s view that the law did not allow the tax consequences disguised remuneration
schemes claimed to achieve. Where a scheme doesn’t work, the tax legally due should be
paid.
Conclusion
HMRC’s response under the FOIA clearly set out the position regarding your rights and our
obligations under the Act. HMRC’s response complied with our obligations under the FOIA
and there are no outstanding procedural issues for us to address.
I do, however, find that in this instance section 31(1)(d) was not the most appropriate
exemption to apply to your request for information.
Unfortunately this does not mean that I am able to provide you with the information
requested. As advised I find this information to exempt from disclosure pursuant to the
absolute exemption at section 44(1)(a) FOIA. As the exemption is absolute I am not required
to consider the public interest in this matter.
Appeal process
If you are not content with the outcome of this internal review, you can complain to the
Information Commissioner’s Office (ICO). You can make a complaint to the ICO by post to:
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The Information Commissioner’s Office, Wycliffe House, Water Lane, Wilmslow, Cheshire
SK9 5AF. Instructions about this process are available at the following link:
https://ico.org.uk/concerns/
Yours sincerely,
Freedom of Information Team