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HMRC on winning streak

HMRC has scored another win in its fight against tax avoidance, with its third court victory in one month.

The tax body’s most recent contest was with Costelloe Business Services (CBS), an ex-managed service company (MSC) that enticed people to establish a limited company in a bid to avoid national insurance and income tax.

Costelloe offered services around tax avoidance to such clients as NHS professionals, doctors and social workers. Several of the clients were guided towards the service via their recruiter.

MSC was advised by CBS to take remuneration in the form of a generous dividend and a small salary. The dividend failed to attract NICs and PAYE.

The first-tier tribunal was in agreement with the tax body’s claim that each of the five cases employed tactics to avoid Class 1 and income tax.

CBS took the stance that the process got around MSC legislation as it had no involvement with each company.

A spokesperson for HMRC said:

“We are pleased with the tribunal’s decision that this so called ‘own company’ avoidance scheme does not work. The tax (including NICs) protected in these cases is £378,000, with £9m expected in respect of all service companies set up under the scheme operated by Costelloe Business Services.”

No business wants to be accused of tax avoidance, so any SME would be well advised to ensure that its accounts are constantly kept up to date and accessible by both the business owner and the taxman, if need be. Certainly, an accountant in the Wirral would be the best person to assist and streamline this process.

Posted by Louise
May 10, 2016

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