Following a consultation on the draft new rules HMRC published a list of Frequently Asked Questions on February 21. These confirm that the new rules are intended to apply to arrangements
"involving a third party to reward employees and directors which seek to avoid, defer or reduce income tax and national insurance contributions",
"used as a tax-advantaged way to save for retirement, using an employer-financed retirement benefit scheme as an alternative to, or to top up, savings in a registered pension scheme."
In HMRC's view, while these convoluted arrangements seek to weave a way through the legal changes, they do not succeed. Even if they did HMRC would still challenge them as delivering remuneration which should have been subject to PAYE from first principles.
Subject to parliamentary approval, the new legislation will be effective from 6 April 2011 and some aspects of the proposed new law will apply from 9 December 2010. These changes are designed to prevent the avoidance of PAYE and national insurance contributions on employment income.
Individuals considering entering into such income tax avoidance arrangements should be aware that HMRC will pursue people who seek to avoid tax on monies they earn, through the courts where necessary.
- NO. The Revenue do NOT approve Disclosed tax schemes
- Tax planning to be wary of
- Were you wasting time advocating this tax scheme?
- Naive promoters of tax avoidance schemes
- Tax avoidance is a card game - the metaphors multiply