Gold bullion tax avoidance scheme makes a comeback

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HMRC has warned employers not to pay employees with gold bars to try to avoid tax.

First there was the 1990s fashion revival. Now, according to HMRC, there is a different type of comeback: a tax avoidance scheme that was popular in the 1990s.

The revenue has issued a ‘spotlight’ publication instructing employers not to pay their employees through gold bars to try to avoid tax.

In the March Budget, the government announced measures against “disguised remuneration” schemes, including ones with gold bars. Under these schemes employees 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,” HMRC said.

“HMRC’s firm view is that these schemes don’t work,” it added, stating that it has begun enquiries into users of these schemes and will challenge them, including using the courts if necessary.

Nigel May, tax partner at accounting firm MHA MacIntyre Hudson, said that there was a “cash extraction” tax scheme involving gold bullion in about 2012.

The scheme involved a company making a contribution to an employee benefit trust (EBT) or EFRBS (an unapproved pension scheme) lending the money to the beneficiary.

According to May, this was countered by the disguised remuneration rules. Rather than making a loan, therefore, the EBT/EFRBS would purchase bullion and pass this to the beneficiary with the beneficiary acknowledging indebtedness to the EBT/EFRBS. “From recollection, because it was a simple debt rather than a loan the argument was that it fell outside the disguised remuneration regime.”

It was still a risky tax scheme, though, plus the investors are also exposed to changes in the gold price if they keep the bullion.

“Generally, people who have participated in these type of arrangement have ongoing costs – i.e. administration of the trust, custodian fees for the gold etc. as well as costs of defending the planning that they have entered into,” May said. “Not generally a happy place to be.”

The gold bullion tax scheme “sounds very 1990s”, commented George Bull, senior tax partner at accounting firm RSM.

Bull said that the only gold bullion tax arrangement he was aware of uses salary sacrifice to pay cash into a self-invested personal pension (SIPP) for an employee. “The SIPP then acquires gold bullion which is held in exactly the same way as any other SIPP investment. All the usual SIPP rules apply.”

About Nick Huber

Nick Huber profile image

I’m a specialist business journalist and have a particular interest in tax and technology. 

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16th May 2016 10:39

Back in the early 1990's (when bankers really did receive thier bonuses in gold bullion) the receipient was paid in bullion on the understanding that it would be sold within hours. This was because of the finite amount of gold available, and the number of people who wanted to take advantage of the gold bullion scheme to save tax & NI.

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16th May 2016 16:27

I'm probably being a bit thick, but gold bullion is the last asset I would want in a SIPP as it pays no income and if kept outside a SIPP it can get tax-free growth via CGT annual exemptions and you can claim CGT losses.

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