I am a contracts manager in a business and sit one level below the directors. We are all part of a profit sharing scheme with our company based on individual project profits in each tax year. Now that the tax year has closed, I will be having our annual review, which determines the sum I am owed. Rather than receive my bonus in my wages (where I will be taxed 40% as this will take me into the next tax bracket), can I purchase services through the company (i.e., patio layers or plasterers) without being taxed myself? For example, on a £5,000 bonus received in my payslip I would lose £2,000 in tax immediately. Could I purchase services that would allow me to use the full £5,000? 

Arthur Weller replies:  

If your company purchases services for you, this is a benefit-in-kind, and you will have to pay income tax on the value. If the contract is between you and the business supplying the patio layers or plasterers, the company is paying off your 'pecuniary liability' and this will be subject to income tax and Class 1 National Insurance contributions (NICs). If the contract is between your company and the business, there will be income tax and Class 1A NICs.