Employment Allowance Scheme

Much kerfuffle this morning from the BBC’s shock horror revelation that someone is allegedly promoting an “aggressive” tax avoidance scheme, based on the Employment Allowance – a government scheme to hand back up to £2,000 per employer. More details on the Employment Allowance are here. Set up multiple companies, the promoters apparently say, and you can claim multiple lots of £2,000. Hmm.

Call us pedants, but despite what the BBC say, this isn’t technically a tax avoidance scheme at all: the Employment Allowance is a payment from Government, not a tax. The distinction is significant: although artificial schemes to avoid Income Tax and various other levies (including National Insurance Contributions) are notifiable under the “Disclosure of Tax Avoidance Schemes” regulations, it is at least questionable whether the Employment Allowance falls within those rules. So HMRC’s assertions that the promoters of the scheme may have exposed themselves to penalties of up to £1m for failure to disclose the scheme may turn out to be wide of the mark.

That interesting technical observation aside, it does seem extremely unlikely that the scheme (or planning, if you prefer) works. The legislation (National Insurance Contributions Act 2014, since you ask) includes some pretty straightforward anti-avoidance provisions: “A person cannot qualify for an employment allowance for a tax year if, apart from this subsection, the person would qualify in consequence of arrangements (including any agreement, understanding, scheme, transaction or series of transactions, whether or not legally enforceable) the main purpose, or one of the main purposes, of which is to secure that a person benefits, or benefits further, from the application of the employment allowance provisions.” Looks to us like HMRC have a killer punch there.

Our advice? You’d probably get a better return from bribing FIFA officials than in investing your money in a scheme of this kind.

David Whiscombe


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