HMRC is aware of a new disguised remuneration tax avoidance scheme that attempts to avoid income tax and NICs by paying contractors in the form of redeemable loyalty points.

The planning involves a contractor becoming an employee of an umbrella company. The contractor is paid in two parts. The first part is a small basic wage with little or no tax and NICs deducted and the second part is used to advertise the contractor’s services on a job board.

HMRC does not accept that this, and other similar planning, has the intended fiscal effect. It says it will investigate the tax affairs of all contractors and umbrella companies using such planning arrangements.

A copy of Spotlight 37 can be found here.