A tax tribunal has ruled that PAYE tax and national insurance contributions (NICs) should have been paid on bonuses given to directors through companies set up just to be liquidated and pay out the cash, in a ruling that could trigger more tax investigations.
Announcing the decision on 25 July, HM Revenue & Customs said that the ruling had protected £22 million in PAYE tax and National Insurance.
Tower Radio Ltd and Total Property Support Services Ltd were lead cases at the tribunal, whose decision has significant implication for 104 other companies that used the same tax scheme to try to pay bonuses without any PAYE tax or NICs.
The companies set up subsidiary companies as special purpose vehicles (SPVs) funded with surplus cash. The directors were awarded restricted shares in the SPVs, which were then liquidated and the cash paid out to the directors as distributions in respect of their shares. The tribunal judge ruled that PAYE tax and NICs must be paid on the money received by the directors.
Exchequer Secretary David Gauke said: “The ruling is another important win for HMRC in its work to ensure the right amount of tax is paid by everyone. This is a clear result and should act as a warning to others who try to manipulate the system.
With the government investing nearly £1 billion in HMRC to tackle tax avoidance and evasion, more individuals and businesses are likely to become the focus of tax investigations.
If HMRC shows an interest in your tax affairs, Taxation-Investigation’s experts can provide expert advice, arguing your case robustly where your tax matters are in order or, where there are issues to be resolved, negotiating to minimise financial penalties. We also have a proven track record in dealing with matters quickly and cost effectively.
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