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Saving on Employees NI ?

Saving on Employees NI ?

My client would like to pay his employees weekly. The first 3 weeks at £90 and then a balance in the 4th week of, say, £2000 to escape the 11% e'ees NI on roughly £1400.

Is it true that the Inland Revenue can only go back one year if they are satisfied the scheme has only been set up to avoid NI? Has anyone seen such a scheme in practice or do you think this is likely to be kicked into touch by the Revenue?
Stephen Green

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By Anonymous
30th Sep 2004 12:31

Minimum wage?
Would there not be an issue with minimum wage legislation - as effectively the employees would be getting (say) £2.00 per hour (assuming a 45 hour week) for three out of four weeks?

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By lfidler
28th Sep 2004 11:20

It's in the regulations
Regs 30 and 31 of the Social Security (Contributions) Regulations 2001 (SI 2001/1004) address this under the headings: 'Abnormal Pay Practices' and 'Practices Avoiding or Reducing Liability for Contributions'. The former enables the officer to make a decision that 'shall not apply to contributions based on payments made more than one year before the beginning of the year in which that decision is given' and the latter enables the giving of a direction that 'shall specify the date from which it is to have effect, which shall not be earlier than tha on which it is given.' So your adviser is right. Yes, I've seen the equivalent regulation in the 1979 Regs used. (See www.legislation.hmso.gov.uk/ for the text of the SI).

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28th Sep 2004 12:57

and
Note that you cannot do this for directors because of the annual pay period rules.

Pragmatically, perhaps a better idea is to pay an annual bonus to the regular employees, rather than provocatively doing a monthly double shuffle like this.

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