On 2 June 2015, HMRC announced that it considers that a scheme that purports to eliminate the user’s entire employer NIC liability (via the £2,000 NICs employment allowance) does not work. HMRC has been encouraging scheme users to withdraw from it and to notify HMRC in order to avoid investigation and litigation costs, penalties and interest, on underpaid NICs. HMRC is investigating the use of the scheme and has indicated that it will challenge every case it identifies.

According to HMRC, the scheme involves a payroll company taking on a business’s staff and setting up underlying companies, each of which employs small numbers of the staff. The business is invoiced for the services of its now former staff. Each underlying company then claims the full allowance to eliminate the employer NICs liability.

HMRC states that the scheme falls foul of the allowances targeted anti-avoidance rule and as a result, does not work. Further, HMRC’s view is that the scheme is notifiable under the DOTAS rules.

You can read more here.