HMRC has warned taxpayers to be wary of tax avoidance schemes that claim to allow companies to pay their employees directly, without deducting any tax and NICs. A number of the schemes have been disclosed under the DOTAS rules.
‘These schemes often involve the company making a payment to an employee on condition that the employee subscribes for shares in the company of a face (nominal) value equal to the payment. But the employee only pays a small amount of the face value of the shares – they remain partly paid up. The obligation to use the payment in this way is claimed to prevent the employee paying tax and NICs on the payment,’ HMRC said.
‘But in HMRC’s view these schemes don't work. For the employee, the payment is earnings from employment and chargeable to tax and NIC. For the employer, the scheme is an “employee benefit scheme” for the purposes of the corporation tax rules, which restrict deductions for employee benefit contributions.’ Guidance is provided at hmrc.gov.uk/avoidance/spotlights.htm.
HMRC has warned taxpayers to be wary of tax avoidance schemes that claim to allow companies to pay their employees directly, without deducting any tax and NICs. A number of the schemes have been disclosed under the DOTAS rules.
‘These schemes often involve the company making a payment to an employee on condition that the employee subscribes for shares in the company of a face (nominal) value equal to the payment. But the employee only pays a small amount of the face value of the shares – they remain partly paid up. The obligation to use the payment in this way is claimed to prevent the employee paying tax and NICs on the payment,’ HMRC said.
‘But in HMRC’s view these schemes don't work. For the employee, the payment is earnings from employment and chargeable to tax and NIC. For the employer, the scheme is an “employee benefit scheme” for the purposes of the corporation tax rules, which restrict deductions for employee benefit contributions.’ Guidance is provided at hmrc.gov.uk/avoidance/spotlights.htm.
