Everything you need to know about the Spotlight 51 Notice:

Everything you need to know about the Spotlight 51 Notice:

Spotlight 51 Notice

  • For some years, HM Revenue and Customs (HMRC) have published ‘Spotlights’. A list of information about tax avoidance arrangements that have come to their attention. Many of the spotlight schemes are complex and convoluted. Moreover, in normal circumstances, few taxpayers would become involved in using them unless they had aggressive tax avoidance in mind.
  • Furthermore,In the eyes of HMRC, ‘Spotlight 51’ is an arrangement that provides contractors with tax-free earnings or profits. Loans are not available to contractors compensated by trusts or umbrella companies. Also Companies or company directors or self-employed individuals can enroll for this scheme. In addition the user contributes to a remuneration trust, with trustees based offshore. In contrast to the scheme used by contractors in spotlight 33. Especially this scheme purports to provide remuneration or profits free of tax.

How does the Spotlight 51 Notice Scheme claim to work?

  • The compensation trust is set up in a fictitious way, with the pretence that it will benefit persons (beneficiaries) other than the scheme user. Individuals who work in the business or profession of lending money are alleged beneficiaries.. The trustees take no action to identify or reward the alleged beneficiaries.
  • Managing this scheme requires the establishment of a personal management company. And controlled either by the scheme user or connected party supporting the scheme. A portion of the money contributed to the remuneration trust is ultimately paid to the personal management company, usually after deducting the 10% scheme fee.
  • Moreover, thisallows the scheme user full access to the funds. Generally, the scheme user gets access to his or her contribution to the remuneration trust via unsecured loans or fiduciary receipts from the employee’s personal management company. They are tax-free, as are the terms, and they are not available through high-street lenders.
  • Scheme users often claim living expenses on receipts from the personal management company. In addition the personal management company may invest the money according to a decision made by the scheme user.

What happens if you use the Spotlight 51 Notice scheme ?

  • HMRC’s view is that the claims made by scheme promoters about the tax savings are not credible or genuine. If an individual is using this scheme, they may find that the  Corporation Tax, PAYE tax, National Insurance contributions, and Inheritance Tax are all chargeable for company and company director users deductions claimed by self-employed individuals and partnerships are not allowable expenses, and Inheritance Tax is chargeable.A statutory due date for paying tax may also carry interest and penalties.

What to do if you are using this scheme?

  • Importantly, The HMRC strongly advises you to withdraw from it and settle your tax affairs. HMRC’s strong view is that this and similar schemes do not work and will challenge the promoters and users of this scheme. HMRC’s view is that the claims made by scheme promoters about the tax savings are not credible or genuine. HMRC strongly advises to withdraw from such schemes and settle the tax affairs. HMRC states that it would avoid the costs of investigation and litigation and minimize interest. Where they apply, penalty charges on the tax that should have paid.

If you are already speaking to someone in HMRC about using an avoidance scheme. HMRC advises that you should contact them. If you do not have a contract and you are in a tax avoidance scheme and want to get out you can contact help@bizlawuk.co.uk or WhatsApp us on 07583452230. Visit www.bizlawuk.co.uk to find out more about how we can help you.

Reina D'costa

Dual qualified, experienced, practical and proactive solicitor. Founder of Bizlaw UK, a new model legal service consultancy.