18th August 2017
Bad news, folks. You’re no longer allowed to pay employees their salaries in gold bullion. While many of you are probably wondering if this was actually an option in the first place, a new report suggests that one of the more creative tax evasion schemes identified in recent years has been shut down before it’s even really got going. But why are gold payments being outlawed?
An expert tax avoidance panel has ruled that paying employees in gold is a ‘contrived’ tax avoidance scheme designed to ‘frustrate the intent of parliament’. This represents the first application of the general anti-abuse rule (GAAR) since its introduction in 2013 and ties in with the growing focus on tackling tax evasion in the UK, in whatever form it may take.
However, although this type of scheme may seem like an opportunistic way for firms to avoid paying appropriate levels of tax, it’s far from the first of its kind. According to Bill Longe, a tax expert at accounting firm, RSM, they date back decades:
“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.”
One gold bullion scheme noted by accountancy news website, CCH Daily outlined how, “One option is for your company to pay your net of tax wages in ‘money’s worth’, which means other than cash. For instance, we discussed the example that you could ask your company to pay you in gold sovereigns. 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.”
Creative tax evasion schemes
The move to quash alternative and creative tax evasion schemes like this before they’ve really even got off the ground is indicative of the growing focus on cutting fraud wherever possible. This is far from the first strategy like this in recent times. The Panama Papers leak, for example, revealed that thousands of individuals and organisations around the world are funnelling their taxes through offshore accounts. Another, more left field, example comes from Germany where in the 1970s, many citizens would avoid ‘finishing’ their newly built houses, leaving exposed brickwork or unfinished painting to avoid tax due on fully completed properties. Unsurprisingly, this scheme is also no longer in existence.
With the growing focus on tackling tax evasion, even highly creative schemes like this have little to no chance of slipping under the radar. And if such an unusual measure as paying staff in gold bullion doesn’t work, what chance does a firm using relatively straightforward means to intentionally or otherwise cheat the system really have? The net is closing in on the entire tax arena with governments around the world intent on cutting deficits by claiming lost revenue. If your organisation is taking an unnecessary risk, or you’re at all unsure about its legal status, then partner with a specialist before it’s too late.