EIM12030 - Non-cash remuneration: handling of PAYE/NIC avoidance cases
Before 1 April 1999 the Inland Revenue was responsible for
collection of PAYE and the Contributions Agency for NICs. From 1
April 1999 the Inland Revenue merged with the Contributions Agency
and collection of both PAYE and NICs became the responsibility of
the Inland Revenue.
Personal Tax, as it was then, had responsibility for the
handling of schemes aimed at PAYE and NICs avoidance by providing
employees with remuneration paid in a non-monetary form.
Co-ordination of appeals by Personal Tax
Since the early 1990s we have seen large numbers of cases
involving payments in various forms of non-cash remuneration and in
many instances employers and the Inland Revenue have been unable to
reach agreement on the correct tax treatment. Since some of these
schemes were widely marketed by tax advisers, many of the cases we
see are often almost identical in all material respects. Where a
scheme has been used by a number of employers it is essential that
a consistent approach is adopted in all cases.
Consequently instead of asking General Commissioners to
consider appeals in all these cases, in order to co-ordinate the
handling of all the PAYE and NIC appeals, Personal Tax adopted a
policy of selecting a small number of representative cases for
litigation. Paul Dunstall Organisation Ltd (see
EIM12003), NMB Holdings Ltd (see
NCR2/2000) and DTE Financial Services Ltd (see TCR14/01) are three
examples.
The representative case approach, whilst ultimately helpful
in providing judicial guidance for considering the many open
enquiries that were put on hold pending decisions in the
representative cases, is not without inherent difficulties.
Therefore Personal Tax is now reconsidering the most effective way
of addressing the problems posed by the need to ensure a consistent
approach across widespread compliance activity.
Representative cases are not test cases
Please note that the small number of cases selected for litigation are not test cases. That term has a technical meaning that does not apply in these circumstances. The cases should only be referred to as representative cases. They provide guidance as to how the Courts might view the proper application of the PAYE and NICs legislation in the event that a case based on broadly similar facts comes under consideration.
