Employers who have undertaken tax planning intended to reduce national insurance contributions (NIC) may have received, or be about to receive, letters from HMRC’s Special Civil Investigations (SCI) office. SCI regards the planning as flawed and has indicated that it will be seeking substantial duties and interest, and potentially penalties.

The planning involves the award of shares and subsequently the payment of dividends in place of remuneration. A new company is established and employees are transferred to the new company under new contracts of employment providing for the payment of the Statutory Minimum Wage. The employees are also awarded shares in the new company and receive weekly dividends broadly equivalent in amount to the remuneration they previously received. NIC is not accounted for on the dividends.

It is important to ensure that clients take the appropriate action in response to these letters in order to limit their exposure.

If your client receives a letter from SCI or you would like to discuss this matter more generally, please do not hesitate to contact one of the Tax Investigation specialists listed below. We have considerable experience of successfully dealing with SCI investigations and are well placed to assist.

 

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