New tax avoidance risk tool for umbrella contractors
HMRC has launched a new tool to help contractors assess whether their ‘umbrella company’ is a tax avoidance scheme in disguise.
With umbrella compliance issues at an all time high, the tool uses simple multiple-choice questions to help contractors spot dodgy schemes.
Many tax avoidance schemes masquerade as umbrella companies to dupe unsuspecting contractors.
This tool can be used to find out if you could end up with a large tax bill or penalties.
Critics, however, say that HMRC hasn’t gone far enough to tackle this problem and many are calling for the umbrella company market to be regulated to stop rogue operators.
Labour MP Ruth Cadbury said: “The government has so far done nothing but publish some guidance.”
She continued: “The ‘Wild West’ supply chain of unregulated companies [continues to] conspire to lure workers into tax avoidance schemes, often entirely unwittingly.”
The new tool is part of a broader education campaign from HMRC called ‘Tax avoidance - don't get caught out’.
As part of the campaign, the tax authority says there are three main warning signs that might mean you’re being offered a tax avoidance scheme. There are:
The proposed contract pay arrangements are very complicated
You have been told you’ll take home more money after tax than you otherwise would have expected
You are offered a cash bonus if you recommend a friend
One of the best ways to tell if an umbrella company is compliant is to look for accreditation from a reputable body. Umbrella.co.uk holds both FCSA accreditation and ASPCo Umbrella Company Trusted Partner status, which reflects our high compliance standards.
Miles Grady, Director of Umbrella.co.uk, said “This tool might stop some contractors ending up in a tax avoidance scheme, but regulating umbrellas is still the best way to protect contractors.”
For more information about working through a compliant umbrella company, speak to a member of the team today. Call: 0800 121 6513.