Using gold bullion to pay wages as a way of avoiding tax has been stopped as a result of an expert panel’s decision.
The specific case in question saw two directors of a company each receive payments of around £150,000 via a complicated sequence of actions, involving an offshore trust and the acquisition and immediate sale of gold bullion.
The panel, made up of tax avoidance experts, ruled that paying wages in gold bullion is a “contrived” scheme for tax avoidance that is designed to “frustrate the intent of Parliament by identifying potential loopholes”. They said they found “no reason for the steps to involve gold, other than for tax purposes.”
This was the first use of the general anti-abuse rule panel (GAAR), which was set up by former Chancellor George Osborne in 2013 as a method for combating tax evasion. The finer details of the ruling were debated by an advisory panel that included accountants, business representatives, campaigners and lawyers.
HM Revenue & Customs said it was delighted by the decision which “reinforces the power of the GAAR in tackling abusive tax avoidance.” It said: “HMRC has already made clear that gold bullion avoidance schemes don’t work and that we will challenge these schemes.”
Bill Longe, tax expert at accountants RSM, said the gold bullion scheme dates back decades. He told the Guardian: “People used to be paid in all sorts of assets – hay, wine, Persian carpets, Turkish lira, gold bullion, platinum – all these arrangements were freely available and a means of avoiding tax and National Insurance contributions on bonuses.”
In May 2016 HMRC warned against paying salaries in gold bullion with the announcement of several related changes which would tackle the current and historic use of disguised remuneration tax avoidance schemes. It said: “HMRC will challenge these schemes wherever possible, including legal action through the courts. Despite this, promoters have continued to market these schemes.”
The government has been met with questions as to why it’s taken four years since the introduction of the GAAR for it to be employed. The delay was likely because the GAAR could only be applied to transactions reported after July 2013, which didn’t have to be filed with HMRC until January 31, 2015. Investigations would then have taken some time. A big downturn in the use of similar avoidance schemes was also reported.
Clearly using gold bullion to avoid tax obligations in this way is not to be recommended, especially when there are plenty of perfectly legitimate ways to benefit from owning gold.
In fact for individuals gold could actually offer some legitimate tax benefits in the form of Capital Gains Tax (CGT) relief, such as is offered on some gold coins.
