What is notable from both is that the tax avoidance schemes follow a similar structure. The users (normally contractors or temporary employees) are employed by the supplier (the employer) and receive payment from the supplier in two parts.

The first part is an amount recorded as salary, purporting to satisfy National Minimum Wage regulations and is subject to income tax and Class 1 national insurance contributions (NIC) withholding under pay as you earn (PAYE) by the employer. The second part is often described and structured as an advance (a loan) which is not taxed or subjected to NIC under PAYE by the employer.

Many arrangements such as these, which supposedly have the main benefit of securing a tax advantage, do not secure the tax and NIC advantages promised. This is because the advance, regardless of how it is described, should then be taxed and subject to NIC under PAYE by the employer as part of the contractor’s employment income.