Employee bonus schemes in the spotlight

HMRC have recently published the latest addition to their tax avoidance guidance series, entitled Employee Bonus Schemes: Growth Securities Ownership Plan and other avoidance schemes based on contracts for difference (Spotlight 28). The Spotlight guidance confirms that, in HMRC’s opinion, growth securities ownership plan schemes do not work and any payment made by an employer to an employee on the maturity of the contract for difference should be taxed as employment income and subject to PAYE income tax and National Insurance contributions (NICs).

Broadly, under this type of arrangement, each employee acquires a contract for difference which entitles the employee to receive a cash payment at a pre-determined date provided a pre-determined hurdle is achieved (often referred to as the ‘upside’). A feature of these avoidance schemes is that on entering the scheme, the employee usually agrees to reimburse the employer for the tax and NIC that HMRC recover from the employer.

HMRC have confirmed that any employer who has used a contract for difference scheme and wishes to avoid litigation can pay the outstanding tax and employer and employee NIC together with the interest which has arisen upon it.

For further information, see Spotlight 28 at here.

News / Blog

21st
February

Should your Business have a Reward Scheme?

For small or medium businesses, competing against the big guys can be difficult. In order to stay on top of…

15th
February

Cracking Down on Tax Returns: How the Government is Miles Behind Target

It seems that the UK’s crackdown on Offshore tax avoidance has only managed to recover a third of the £1…

8th
February

Five Rules for Spotting and Avoiding Scam HMRC Emails and Phone Calls

Business owners usually receive dozens of emails a day. Many of them look very official, but how can you identify…

1st
February

HMRC Stop Thousands of Scam Messages

HM Revenue and Customs manages to stop thousands of taxpayers from receiving scam text messages.