Will a charity donation (salary sacrifice) reduce deemed payment for IR35

Will a charity donation (salary sacrifice)...

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IR35 caught client wants to do a salary sacrifice for a charity donation by his company and expects it to reduce his IR35 deemed payment in the same way that the company paying an employers pension contribution would. We're talking a huge sum of money here - tens of thousands. I've looked and looked at the HMRC webpages about IR35 and loads of accountants & IR35 specialists websites but can't find an answer - can't even find such a plan mentioned at all.

Plenty of examples showing how "emoluments" such as benefits in kind (cars etc), are deducted in the calculations, as are pension contributions, but I just can't see any authority which allows charity payments to be deducted.

Last year he did a personal gift aid so he got the H/R 20% back via his SA return, but he was a bit miffed that he'd paid both employers and employees NIC on it, hence why he now wants to pay directly by the company to reduce his deemed salary and thus NIC as well as tax.

(By the way, no this isn't any kind of scam or tax dodge - it's a donation to a genuine charity and there's no pay back.)

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By WhichTyler
15th Feb 2013 09:57

Does this help...

http://www.hmrc.gov.uk/businesses/giving/payroll-giving.htm

I'm no IR35 expert, but it seems to offer the mechanism you are looking for...

 

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By George Attazder
15th Feb 2013 10:27

I don't think payroll giving helps...

... since it's essentially tax neutral and doesn't have an NIC effect.

You won't get an IR35 effect of the donation in the company, you need to get the company's client(s) to pay to the charity instead of to the company, bearing in mind that they will then get the tax relief.

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By mikewhit
21st Feb 2013 21:11

Holding company

I'm sure this has been disproved elsewhere, but is it possible that a holding company could divert funds to the charity (say by shareholding or just donation) before it hit the company in which your client works ?

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