Tax avoidance schemes targeting middle earners
A new report by The Sunday Times suggests that more workers are being tied to tax avoidance schemes, whether they like it or not.
As a consequence of the tightening of rules under IR35 many contractors are entering into ‘umbrella company’ arrangements, typically this means they are still not directly employed by the company they work for but instead suffer PAYE in a company specifically set up to offer them to the company they work for. This is a common solution to the current rule change.
But dig a little deeper and the report actually suggests that some of these umbrella companies are avoiding this paye route and instead tax avoidance schemes are being used by engagers that are responsible for agency workers – locum nurses, for example.
In many cases, the choice facing these workers is to either work for the engager who uses the scheme or potentially face unemployment.
Consequences for workers
Unfortunately, these workers can subsequently face expensive, intrusive and stressful investigations from HMRC.
These schemes often involve the umbrella companies paying workers through a mix of small salaries and ‘loans’ that are not subject to tax or NI – or so the schemes claim. HMRC is adamant that these schemes do not work, and resources have been increased to tackle issues of fraud and tax avoidance.
So, if your engager or employer tries to convince you to accept a payment method that involves a third-party company, and says that you will keep a percentage of your earnings that is not aligned with UK tax bands, then it is probably a tax avoidance scheme.
HMRC has set up a hotline so you can report tax avoidance
If you want to report a scheme, or a promoter, you can ring the Avoidance hotline on 03000 588 993. You can also email using Tax avoidance schemes