HMRC have confirmed details of a new disguised remuneration tax avoidance scheme that attempts to avoid Income Tax and National Insurance contributions (NICs) This is done by paying contractors in the form of redeemable loyalty points.
HMRC have confirmed:
The 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. They immediately receive loyalty points in return for keeping their details on the job board. The loyalty points can be cashed in by the employees shortly after, with no deductions made for tax or NICs. The contractor usually has to pay a large fee to the third party running the job board.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.
Users of this type of avoidance scheme should contact HMRC and make arrangements to settle the tax and NICs due as soon as possible. If you don’t, you may have to pay interest and could receive a penalty.
More details are available here.
