Now that the dust has settled, the ‘Anderson’ tax avoidance story, regarding a system which appeared to offer to cancel the requirement to pay employers national insurance, perhaps told us more about how these stories are reported than the underlying issues, and reminded us of an old but very reliable rule – if it looks or sounds too good to be true, it almost certainly is.
In short, in a meeting with some sort of ‘promoter’, the impression was given that employers national insurance of £300k could be saved with a system that exploited the Employment Allowance, which when used properly allows most companies to reduce their employers national insurance bill by £2k if certain conditions are met. Apparently the audience were pushed towards using the £300k saving to buy luxury cars and ski chalets. The story was described as a Tax Avoidance scheme.
Firstly, the ‘Anderson’ scheme was, according to later reports, not an Anderson service. It was something they were not responsible for. Let’s make that clear. We’ll gloss over the suggestion that £300k could buy a ski chalet – rent one possibly, but we would imagine a decent chalet would retail for a little more than £300k. More importantly though, could the reported savings really be made? If a provider were to ‘run’ (or rather, prepare accounts for) 150 companies (which is the number required for a saving of £300k) they would presumably charge for this service. Rates purely for the preparation of accounts and other regular services typically start at £1k per company, so at least half of the saving would presumably have been soaked up in fees, if not more.
More importantly, the system wouldn’t work, as HMRC also made clear. We’ll ignore the question of whether a scheme intended to claim allowances, rather than to avoid tax is technically a tax avoidance scheme (surely not?). But what is clear is that the Employment Allowance is not available to an employer established for the purposes of claiming the allowance. And, the described system, where groups of employees are put into small companies to exploit the allowance claim sounds very likely to us to fall foul of the MSC legislation, although this wasn’t mentioned in the original story. This would of course put everyone in the contractual chain at risk of a claim for unpaid employment taxes, a nightmare scenario for accountants, agencies and end users, not to mention the poor workers themselves.
If you’re offered a scheme or solution that appears to work like magic, speak to us, and we’ll check it out. We think modern businesses care about compliance, and the regulatory landscape means there’s no option in any case. That’s what we’re here for.