Tax avoidance schemes involve bending the tax rules to gain an advantage never intended by Parliament. This is usually done by making contrived and artificial transactions that serve little or no purpose except for reducing the amount of tax paid.
Often, these are umbrella companies or payment middlemen who promise that you will end up with more take-home pay by using their services.
HMRC has powers introduced in the Finance Act 2022 to name avoidance scheme promoters, publish details of the way they promote tax avoidance schemes and name the schemes they promote.
This allows HMRC to warn users and potential users of these schemes at the earliest possible stage, of the risks associated with use of the scheme, and to help those already involved to leave these avoidance arrangements.
What are your risks when joining tax avoidance schemes?
If you are found to be involved in a tax avoidance scheme, you could face various consequences, including:
- Paying penalties, or interest on the tax paid late
- Be required to pay all unpaid tax upfront and within 90 days
- Be taken to court, where HMRC wins 9 out of 10 tax avoidance cases
- Be treated as a high-risk taxpayer, meaning HMRC will closely inspect all your future tax affairs
How do I spot a tax avoidance scheme?
HMRC outlines things to look out for that hint at a scheme being aimed at tax avoidance. These are some of the warning signs:
- It sounds too good to be true, such as promising to lower your tax bill for little to no cost.
- Promising to put money in your pocket without having to pay tax. This can mean payment in the form of loans, grants, bonuses, and salary advances.
- Promises of huge benefits
- Payments that go around in circles, or transactions which seem to have no purpose
- Misleading claims like ‘HMRC approved’, ‘Retain more of your earnings after tax’, or ‘Compliant tax efficient pay’. As you would probably expect, HMRC does not ‘approve’ schemes which aim to avoid tax
Which companies are already labelled as tax avoidance schemes?
The latest list was published on 19 January 2023 and includes details of five newly added tax avoidance schemes.
Three of the schemes make use of complex company structures and directors’ loan accounts to extract profit, providing directors with income where Corporation Tax, Income Tax and National Insurance contributions were not correctly paid. The other two schemes make one payment to users that is close to National Minimum Wage and then another disguised payment, which the promoters claim is non-taxable and Income Tax and National Insurance are not correctly deducted.
This latest list of tax avoidance schemes contains these 32 companies and schemes:
- Able Ltd
- Absolute Outsourcing Limited
- AML Tax (UK) Limited
- Charteris Management Ltd
- Contractor Central Accounting Ltd – see Able Ltd
- Contractorcare Limited
- Countrywide Partners Limited
- Denmedical UK Limited – see AML Tax (UK) Limited
- Focus Contractor Limited
- Gateway Outsource Solutions Limited
- Greenwich Contracts Ltd
- Griffith Anderson Limited – see Umbrella Agency Limited and Charteris Management Ltd
- Howe Consultancy Limited (Incorporated in Isle of Man) – see Charteris Management Ltd
- Industria PAYE Limited
- Integra Resourcing Limited (Incorporated in Malta) – see Greenwich Contracts Ltd and Charteris Management Ltd
- Jeceris Limited – see Charteris Management Ltd
- Nicely Paid Limited
- Novus Consultants Limited (formerly Novus Limited) (Incorporated in Isle of Man) / Contractor Corner Accounting Limited
- Ombros Solutions Limited – see Charteris Management Ltd
- Omni Contractors PCC Limited (Incorporated in Isle of Man) – see Saxonside Limited – Saxonside Share Growth and Focus Contractor Limited – Share Growth
- Paybox Umbrella Limited
- PAYEme Limited
- Peak PAYE Limited
- Pure Invoicing Limited
- Purple Pay Limited / Equity Participation Scheme
- Saxonside Limited
- T2 Outsourcing Limited
- Tailored UK Services Ltd (trading as Tailored Resourcing)
- Taurus Limited (Incorporated in Isle of Man) – see Charteris Management Ltd
- U R Group Limited
- The Umbrella Agency Limited
- We PAYE Umbrella Limited
To get more information about these companies and why their schemes are considered tax avoidance, visit this page.