Avoiding Income Tax on pay (Spotlight 11)
Published 23 August 2011
© Crown copyright 2011
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HM Revenue and Customs (HMRC) are aware that people who have used employee benefit trusts (or similar) to avoid paying tax on employment income. These people are being targeted with products designed to shelter funds in current schemes from the effect of tax legislation.
The arrangements rely on the availability of credit for loan repayments made before 6 April 2012. The view of HMRC is while these convoluted arrangements seek to weave a way through the legal changes, they do not succeed. Even if they did, HMRC would seek to challenge them for delivering remuneration which should have been subject to PAYE (Pay As You Earn) taxation from the employer.
The legislation, effective from 6 April 2011 was 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.