[UK] Tax avoidance loophole could expose employers to risk

In the UK, HMRC has removed seven tax avoidance schemes, including umbrella companies, from its online list in response to legislation that prevents schemes from being named for more than 12 months, HR Magazine reports.

Three new promoters of tax avoidance schemes have been added to the online list over the past week, however, concerns have been raised that the 12-month limit could expose employers to risk. 

Julia Kermode - CEO of PayePass- told HR Magazine that the rule poses a risk to workers and clients. 

She said, “It’s absurd really. As part of the Finance Act 2021, as soon as a scheme has been on HMRC’s list for a year, it’s removed.  

“This is completely counterproductive and calls into question the very point of having a list of identified tax avoidance schemes.  

“What’s more, this poses a massive risk to workers, along with recruitment agencies and end-clients, each of whom could unknowingly fall into the trap of working through or with one of these dodgy operators.” 

As a result of the bad practice of some errant umbrella companies, used to engage contractors with less regulatory pressure on the employer, the government launched a consultation into the way such firms are run.  

In June, the response to the consultation suggested options to regulate umbrella companies and tackle non-compliance.  

A warning to agency workers and contractors employed by umbrella schemes about how they can be used for tax avoidance has since been published. 

Ms Kermode told HR Magazine that tax avoidance schemes can have devastating effects on those who use them. She cited Loan Charge or ‘disguised remuneration’ schemes. 

Loan Charge schemes reportedly work by adding together all outstanding loans and taxing them as income in one year. But HRMC has stated that they do not work, arguing that the result is likely having to pay tax at higher rates than you would otherwise have done.  

Ms Kermode added, “Thousands of innocent people were lured into working through tax avoidance schemes like the Loan Charge, only to be hit with devastating tax bills years later. The more that is done to put a stop to these unlawful, immoral schemes, the better.” 

Source: HR Magazine

(Links and quotes via original reporting)

In the UK, HMRC has removed seven tax avoidance schemes, including umbrella companies, from its online list in response to legislation that prevents schemes from being named for more than 12 months, HR Magazine reports.

Three new promoters of tax avoidance schemes have been added to the online list over the past week, however, concerns have been raised that the 12-month limit could expose employers to risk. 

Julia Kermode - CEO of PayePass- told HR Magazine that the rule poses a risk to workers and clients. 

She said, “It’s absurd really. As part of the Finance Act 2021, as soon as a scheme has been on HMRC’s list for a year, it’s removed.  

“This is completely counterproductive and calls into question the very point of having a list of identified tax avoidance schemes.  

“What’s more, this poses a massive risk to workers, along with recruitment agencies and end-clients, each of whom could unknowingly fall into the trap of working through or with one of these dodgy operators.” 

As a result of the bad practice of some errant umbrella companies, used to engage contractors with less regulatory pressure on the employer, the government launched a consultation into the way such firms are run.  

In June, the response to the consultation suggested options to regulate umbrella companies and tackle non-compliance.  

A warning to agency workers and contractors employed by umbrella schemes about how they can be used for tax avoidance has since been published. 

Ms Kermode told HR Magazine that tax avoidance schemes can have devastating effects on those who use them. She cited Loan Charge or ‘disguised remuneration’ schemes. 

Loan Charge schemes reportedly work by adding together all outstanding loans and taxing them as income in one year. But HRMC has stated that they do not work, arguing that the result is likely having to pay tax at higher rates than you would otherwise have done.  

Ms Kermode added, “Thousands of innocent people were lured into working through tax avoidance schemes like the Loan Charge, only to be hit with devastating tax bills years later. The more that is done to put a stop to these unlawful, immoral schemes, the better.” 

Source: HR Magazine

(Links and quotes via original reporting)