HMRC reveal new tax avoidance scheme
Released 17 March 2017
HMRC have revealed details of a new disguised remuneration tax avoidance scheme that attempts to avoid Income Tax and National Insurance contributions (NICs) by paying contractors in the form of redeemable loyalty points. It is investigating all users of the scheme, in which a contractor becomes an employee of an umbrella company and is then paid in two parts. The first part is a small basic wage with little or no tax and NICs deducted. The second part of the payment is used to advertise the contractor’s services on a job board, for which they receive loyalty points that they can cash in later.
HMRC say the loyalty points count as taxable income and contractors could end up worse off as they will still owe the tax and NICs. Employment agencies and businesses who are involved in this scheme may also be liable for failing to deduct the correct amount of tax and NICs. HMRC says it will investigate the tax affairs of all contractors and umbrella companies using the scheme. Penalties of up to 100% may apply.
Anyone already using this type of avoidance scheme should contact HMRC and make arrangements to settle the tax and NICs due as soon as possible.
More details are available here.