Coronavirus: UK employees who waived salaries could now face tax bills

Thousands of UK employees who have agreed to waive salaries or bonuses to help their employers during the pandemic could now face tax bills, say leading tax and advisory firm Blick Rothenberg

Nimesh Shah, a partner at the firm said:

“Many generous individuals have agreed to waive pay and/or bonuses to help with their employer’s cash flow or donate to charity. It’s admirable that people are willing to give-up their own pay to help others during the COVID-19 crisis, but HMRC’s tax rules aren’t so generous.”

He added:

“HMRC have issued a news release (https://www.gov.uk/government/news/check-the-tax-rules-on-waiving-your-income-or-donating-to-charity) warning generous individuals that tax charges can arise where they decide to waive a salary or bonus. This relates to specific salary sacrifice rules introduced in April 2017. The original design of the rules was ridiculous rules and should not be catching these situations.”

Nimesh said:

“The Government now have the perfect opportunity to re-write this law, having seen first-hand the complications they cause through innocent acts of kindness.”

He added:

“It’s possible to manage some of the tax charges by carefully planning ahead and ensuring the right documentation is in place between the employee and employer; however, many will be unaware of the exact procedure and tax charges can easily arise on something you never received.”

Nimesh said:

“HMRC’s news release outlines options on how some of the tax charges may be managed. Employers and employees need to act on this right now so that they can mitigate tax charges for loyal employees who are trying to do the right thing and who otherwise will get caught.”

He added:

“The Government and HMRC have introduced temporary exemptions or changed tax rules completely for certain situations during the current crisis – it’s bizarre that they haven’t moved to change these unfortunate rules and chosen only to issue guidance on how charges could be avoided.”

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