1bn tax loophole found

A legal tax avoidance measure could save consumers and businesses around 1 billion.

14:21 29 November 2004

A legal tax avoidance measure could save consumers and businesses around 1 billion.

According to the Times, a number of high-profile firms such as BT, Tesco, Sainsbury and Ernst & Young have adopted the scheme, which cuts National Insurance (NI) bills for both employers and staff.

The technique involves a slight change to pension saving arrangements so that employers take on sole responsibility for contributing to an employee's pension fund.

However, while the firm technically pays the employees' contributions it later docks a similar amount out of employees' wages.

A spokesman for BT, which started using the method six months ago, told The Times that the firm and employees would each save around 10 million in NI payments each year.

If all private sector companies adopted the tax avoidance scheme, it could save consumers an estimated 1 billion in lost NI revenues.