Tuesday August 08, 2017 15:45
(Kitco News) - It is no longer legal for employers to pay salaries in gold bullion, ruled an expert tax avoidance panel in the U.K.
This was a first attempt to use a new law to curb “morally repugnant” tax avoidance schemes, The Guardian reported.
The anti-abuse rule (GAAR) panel, which was put together by former chancellor George Osborne in 2013, announced its first ruling, concluding that paying employee wages in gold bullion is a “contrived” tax avoidance scheme used to “frustrate the intent of parliament,” which is working on fighting such illegal practices.
“It is abnormal for an employer to reward employees using gold,” the ruling said.
The decision frees U.K.’s HM Revenue and Customs (HMRC) to pursue cases against employers playing around with “artificial and abusive” gold bullion schemes.
HMRC cited instances where companies developed schemes that would hide remuneration to employees by conducting payments “via a series of transactions [of] buying and selling an asset, commonly gold bullion.”
“They 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. However, in instances seen by HMRC so far, the individual has actually taken cash, thus supporting the HMRC view this is a payment of earnings,” the department said.
HMRC did not specify the exact number of cases it looked at, but warned that gold bullion avoidance schemes don’t work.
“Today’s publication has wide-reaching impacts and reinforces the power of the GAAR in tackling abusive tax avoidance,” HMRC said.
After analyzing the patterns, GAAR said in its ruling that there was “no reason for the steps to involve gold, other than for tax purposes,” adding that people tried to use loopholes in the anti-avoidance legislation.
“Had cash been used and gold not been involved, other than the saving of fees in relation to the purchase and sale of the gold, neither the company nor the employees would have been in a substantially different economic or commercial position … In our view the steps in this case involving gold are abnormal and contrived,” it said. “It should not come as a surprise that we conclude the steps taken are not a reasonable course of action.”
The Guardian quotes one known gold scheme, citing CCH Daily website: “Your company could buy a coin and use it as part payment of your wages, the value would be its cost and the balance of wages would be paid from the bank account. You could then sell your coin if you wanted to add to the money received from the company.”
