HMRC has warned against participating in an arrangement which involves selling future business revenues to a revenue service trust. Basically, this is another mechanism of disguising your remuneration as something else, and you can read more about this type of scheme here.
Under the agreement the trust becomes entitled to a percentage of the business’s future revenue, and as the business no longer holds this revenue it isn’t included in it’s taxable profit, so no tax is paid on it. The business could be a self-employed individual, a partnership or a company.
Once the revenue has been transferred, the trust will take one of two routes:
- Transfer the revenue to a personal management company controlled by the business owner.
- Send the revenue directly from the trust to the business owner, labelling the funds as “loans” or “fiduciary receipts”, i.e. labelling as something non-taxable.
The transfer of funds is not disclosed to HMRC.
HMRC have stated that they will challenge anyone using these arrangements and anyone promoting them. You can read their full Spotlight here.
If you think you might be involved in such a scheme, please seek specialist advice. We can recommend firms that can assist, just email firstname.lastname@example.org for help.