Salary sacrifice

What about legitimate salary sacrifice as a defence against an s660 attack?

One way in which people in larger companies are reducing their tax and NI liabilities is through 'salary sacrifice' in which they forgo some of their salary in return for - commonly - increased pension contributions, though other compensation arrangements are possible.

"Such arrangements can generate tax and NIC savings for both employer and employee, if the employee gives up part of his or her salary in exchange for non-cash benefits, from pensions to childcare vouchers, home computers and mobiles." (though presumably you need to be careful to avoid benefits on which tax and/or NI are payable! But why not simply retain profits in the company - and then pay them out later as dividends?)

Stephen Herring of BDO Stoy Hayward said "Introducing a well structured salary sacrifice scheme really is no sacrifice at all. It allows owner-mangers to make significant savings on tax which can be passed on to employees – properly implemented it's a perfect 'win win' situation."

If you can do this for your employees, why not for yourself?

So maybe another s660 defence is that a main 'earner' who draws less than a 'market rate' salary is actually implementing salary sacrifice in exactly the same way that is now being done in larger companies - as a perfectly legitimate practice to reduce tax and NI payments.

-- silicondale