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HMRC internal manual

Employment Income Manual

Non-cash remuneration: handling of PAYE/NIC avoidance cases

Before 1 April 1999 the Inland Revenue was responsible for collection of PAYE and the Contributions Agency for NICs. From 1 April 1999 the Inland Revenue merged with the Contributions Agency and collection of both PAYE and NICs became the responsibility of the Inland Revenue.

Personal Tax, as it was then, had responsibility for the handling of schemes aimed at PAYE and NICs avoidance by providing employees with remuneration paid in a non-monetary form.

Co-ordination of appeals by Personal Tax

Since the early 1990s we have seen large numbers of cases involving payments in various forms of non-cash remuneration and in many instances employers and the Inland Revenue have been unable to reach agreement on the correct tax treatment. Since some of these schemes were widely marketed by tax advisers, many of the cases we see are often almost identical in all material respects. Where a scheme has been used by a number of employers it is essential that a consistent approach is adopted in all cases.

Consequently instead of asking General Commissioners to consider appeals in all these cases, in order to co-ordinate the handling of all the PAYE and NIC appeals, Personal Tax adopted a policy of selecting a small number of representative cases for litigation. Paul Dunstall Organisation Ltd (see EIM12003), NMB Holdings Ltd (see NCR2/2000) and DTE Financial Services Ltd (see TCR14/01) are three examples.

The representative case approach, whilst ultimately helpful in providing judicial guidance for considering the many open enquiries that were put on hold pending decisions in the representative cases, is not without inherent difficulties. Therefore Personal Tax is now reconsidering the most effective way of addressing the problems posed by the need to ensure a consistent approach across widespread compliance activity.

Representative cases are not test cases

Please note that the small number of cases selected for litigation are not test cases. That term has a technical meaning that does not apply in these circumstances. The cases should only be referred to as representative cases. They provide guidance as to how the Courts might view the proper application of the PAYE and NICs legislation in the event that a case based on broadly similar facts comes under consideration.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)