Anyone who works in HR in a company, including all HR consultants who operate through their own personal company, will need to understand this new legislation aimed at holding companies to account without having to prove criminal intent or knowledge of their senior management.
The new offence is committed where there has been tax evasion by a tax payer and an employee of the company has facilitated that to happen. That could either be the company as tax payer or it could be one of the company’s employees e.g. somebody when they’re leaving. The employer’s defence is that they’ve put in place all reasonable prevention procedures to prevent the tax evasion from happening.
My recommendation would therefore be that any company have a policy on this – it doesn’t need to be particularly sophisticated but it should be setting out the organisation’s stance on this issue. Contracts of employment should be amended to include clauses bringing the legislation to people’s attention in the same way we would with the Bribery Act. Pay and bonus structures should be reviewed so that there’s no encouragement for people to manipulate the categories of reward that are subject to tax.
In HR in particular, whenever we negotiate a Settlement Agreement there’s always a pressure from the employee concerned to do things in as tax efficient manner as possible, and I am always surprised at how often I see employers allocating sums in the wrong way from a tax perspective. So, for example, holiday pay should be taxed as holiday pay not rolled up into ex-gratia payments.
Where there is a pay in lieu of notice clause in the contract then any notice pay does need to be taxed, and from April of this year all notice pay is going to have to be taxed anyway (see separate video). Whenever somebody is allowed to keep a laptop, phone or another benefits in kind, these things have a taxable value and HMRC should receive payment as part of the exit process. Thus, only genuinely ex-gratia payments should be being paid tax free.
My clients can certainly expect me to be even more vigilant than normal when it comes to these issues especially as there is an unlimited fine at stake!