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Her Majesty’s Revenue and Customs (HMRC) has brought fresh impetus to its crackdown on tax avoidance schemes, issuing a £1 million fine for one promoter and ‘naming and shaming’ four additional schemes.
Hyrax Resourcing Ltd received a £1 million fine for promoting a tax avoidance scheme that paid contractors through loans rather than taxable income.
When it comes to choosing an umbrella company, maximising take home pay is a priority for most contractors.
Unfortunately, schemes that advertise the best rates of take home pay are also the ones that will get you in trouble with HMRC.
Even though most of these firms claim to be ‘100% compliant’, the reality is that an umbrella company that can offer 90% take home pay simply can’t be conforming with tax regulations.
Tax charities TaxAid and the Low Incomes Tax Reform Group (LITRG) have expressed concern about the number of ‘umbrella’ workers being pushed into tax avoidance schemes without their knowledge.
Speaking to the FT, the charities said that more and more workers were getting in touch to complain about non-compliant umbrella companies.
LITRG said some unscrupulous umbrella companies were failing to deduct tax on wages, effectively paying workers via ‘disguised renumeration’, which is banned by HMRC. Affected workers included agency nurses and supply teachers.
HMRC has warned contractors not to be fooled by unlawful tax and umbrella schemes advertising unusually high rates of take home pay.
As the deadline for sweeping IR35 reforms in the private sector draws closer, HMRC has launched a new campaign against tax avoidance and ‘dodgy’ umbrella schemes.
Like the Panama Papers before, the latest leak on the tax affairs of the world’s rich and powerful show that the tide is turning against tax avoidance schemes.
There is no suggestion that those implicated in the leaks did anything illegal, the Paradise Papers have reignited a public debate about the global structures that facilitate tax avoidance.
The leak has led to a further blurring of the line between legal tax avoidance and illegal tax evasion. It has also caused serious reputational damage for dozens of individuals and multinational companies.
HMRC has added three more companies to its list of ‘named tax avoidance schemes, promoters, enablers and suppliers’ and two of them have offices in the North West of England.
The issue of umbrella company cloning has been covered by a national newspaper for the first time. It’s hoped the national news coverage could focus attention on an increasingly worrying issue and force Companies House and the government to act.
Earlier this week, The Mirror covered the ‘mass cloning’ of umbrella payroll companies and blamed Companies House for letting it happen.
Most umbrella companies that you’ll see online are legitimate businesses that pay the correct amount of tax and comply with relevant employment legislation.
Unfortunately, the sector is brought into disrepute by a small group of illegitimate companies that seek to defraud contractors and the state. It seems the latest attempt at doing this is with so-called ‘mini umbrella companies’.
A recent BBC investigation found that around 48,000 mini umbrella companies have been created in the UK in the last five years.
Following an independent review of the controversial loan charge, the Government has launched a consultation on how it can tackle the use of these arrangements.
The loan charge was applied to contractors that participated in so-called ‘disguised remuneration’ tax avoidance schemes. In many of these schemes, contractors were effectively paid using ‘loans’ which did not have to be repaid.
The new rules on travel and subsistence (T&S) tax relief came into force on 6 April. In the same week, unethical but legal tax systems, benefitting the very top of society, were exposed in the Panama Papers.
Umbrella.co.uk director Miles Grady explains why we need a change.
Last week was characterised by two big bits of finance news. The start of the new tax year brought planned T&S tax relief restrictions into force for many contractors.
