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An avoidance scheme designed to exploit the employment allowance has been deemed by tax officials to be ineffective.
HMRC intend to challenge all uses of the arrangement, which the department claims “simply does not work”. Users are urged to withdraw.
An avoidance scheme designed to exploit the employment allowance has been deemed by tax officials to be ineffective.
HMRC intend to challenge all uses of the arrangement, which the department claims “simply does not work”. Users are urged to withdraw.
The proposition is that a payroll company takes on a taxpayer business’s workers and sets up underlying companies, each of which employs a small number of staff.
The taxpayer is then invoiced for the services provided by its former employees, and each company claims the full employment allowance to remove the employer National Insurance (NI) liability.
A targeted anti-avoidance rule in the employment allowance ensures schemes do not work when they use artificial and contrived arrangements, according to the Revenue. The allowance was introduced on 6 April 2014 to allow firms to save up to £2,000 of employer’s NI.
