Introduction

Long before the disguised remuneration (DR) legislation, HMRC had challenged employee benefit trusts (EBTs). Macdonald (HMIT) V Dextra and Sempra Metals Ltd v Revenue and Customs Comrs, heard the decade before disguised remuneration, were largely considered by the profession to have set a clear precedent on the tax treatment for contributions to and benefits received from EBTs.

The tax purpose of the DR legislation was to create a tax charge upon certain events ― ‘earmarking’ thereby rendering the use of third party arrangements to ‘remunerate’ employees obsolete without tax advantages. However, the DR legislation, when considered against the disclosure of tax avoidance schemes legislation, the promoters of tax avoidance scheme legislation and the general anti-abuse rule, is intended to change the perception of tax avoidance.

On 26 November 2020, HMRC published a report ‘Use of marketed tax avoidance schemes in the UK (2020 to 2021)’. The report states “circa 99% of the avoidance market was disguised