07 December 2023
HM Revenue and Customs (HMRC) has updated the list of named tax avoidance schemes, promoters, enablers and suppliers.
Purple Pay Limited have been added and a stop notice issued and published now the appeal period has concluded.
Stop notice 16, issued on 7 December 2023 provides the following details, illustrating the scheme and how it operated.
Details of any arrangements or proposal for arrangements promoted by the person that meet the description specified in the notice
- The arrangement begins with an individual (‘the User’) holding a contract, or about to start a contract, with an end client (‘the End User’) or a Recruitment Agency (the ‘Agency’). The User becomes an employee of Company X who acts as the User’s employer and provides the User’s services to the End User.
- Company X enters into an Employment Contract (the ‘Contract’) with the User which provides that the User will receive a salary from Company X paid at the National Minimum Wage or National Living Wage (both referred to hereafter as ‘the Salary’) plus holiday pay. The individual receives the Salary which is taxed through PAYE and a second untaxed payment (‘the Untaxed Payment’) paid into the User’s bank account as a single amount. The Contract includes the ability for company X to offer additional ‘benefits’ to employees.
- The Users provide services to the End Users and complete timesheets, or electronic time recording system as required by the End User. Company X invoices the End User or the Agency for the work done and receives payments. Company X pays Users the Salary, which is shown on their payslips (the ‘Payslip’), the Salary is paid after deduction of income tax and National Insurance Contributions (NIC). At the same time Company X pays an Untaxed Payment which is not recorded on the Users’ Payslips.
- Company X also issues a Reconciliation Statement (‘Reconciliation Statement’) which show the gross payment received by Company X from the End Users at the full hourly pay rate charged to the End User. The Reconciliation Statement also shows a lower hourly pay rate which is multiplied by the hours worked (to the maximum shown in the contract) to show the amount from which deductions are taken. The net balance represents the Salary which is then carried forward to the Payslip for the pay period on which PAYE is applied.
- The additional Untaxed Payment is shown on a separate document called a Withdrawal Statement (‘Withdrawal Statement’).
Information provided in this news article may be subject to change. Please make note of the date of publication to ensure that you are viewing up to date information.