Tax Avoidance Nightmares

Have you been involved in what HMRC calls “Tax Avoidance Schemes”?

HMRC are trying to encourage people to get out of these schemes as soon as possible and get their tax back on track, but it’s not that simple if you have been involved in the wide variety of schemes that have been in force over the years and are still being recommended and promoted to workers.

You might be a contractor, an agency worker working through an umbrella company. But how can you spot the signs that this may be tax avoidance. 

You need to check your payslips to make sure you’re paying the right amount of tax and if you think you’re not, you need to report it to HMRC. You may have signed a contract, but you will certainly get payslips and a form P45 at the end of the engagement. 

So you need to look out for things like receiving more money in your bank account than what is shown on that payslip, or receiving tax free payments like loans or capital advances. The money you receive in your bank account should match the net pay on your payslip, so you should stay clear of these avoidance schemes. 

But you may have been offered them through an agency on a ‘take it or leave it’ basis and getting that work may mean you have little choice but to sign up for such a scheme.

An umbrella company is a business often used by recruitment agencies to pay temporary workers and we have seen them widely used in the case of nurses, doctors, social workers as well as IT specialists. Recruitment agencies may use an umbrella company as your employer and they will pay you. There is guidance on HMRC’s website at Gov.uk – ‘Working through an umbrella company’.

But for many people they may have been involved in umbrella companies many many years ago and we are still waiting for HMRC to come to a conclusion on numerous companies going back many years. 

Interest will continue to accrue on any tax you owe and HMRC will not budge on this and won’t settle these cases until they have considered all the workers involved in them. 

This means you can be kept on a string for three or four years while they send you the bill. 

To save interest, you can make a payment up-front on account of what you might owe, but it is very difficult to work out what you might owe, particularly if you’ve been involved in three or four companies consecutively or overlapping.

HMRC has recently sent out thousands of letters to people waiting to settle their umbrella company tax. These letters relate to people who come under the disguised remuneration loan charge.

The government announced a new independent review of the disguised remuneration loan charge last year and have recently published more details about it. You may have been given a name as a contact, but the case will not be anywhere near the settlement stage at present. 

It’s a matter of wait and see and they have sent out fact sheets answering a lot of the common questions, but there is no end date or end in sight. What it does say is that HMRC are required to charge interest in law. They charge it on a daily basis and it will never be remitted or reduced. They’re asking for payments upfront to stop the amount of interest building up, but this is voluntary on your part.

If you have any tax avoidance queries or are waiting to settle aged schemes or current schemes contact us and we will be able to advise you on how to minimise your liabilities going forwards.

Contact Andy on 07879 464577 or Lindsay on 07584706664