Tax avoidance schemes: HMRC Spotlight 52
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The latest in the HMRC “Spotlight” series on tax avoidance schemes is Spotlight 52.
This particular spotlight has come about as a result of two cases involving a known tax avoidance scheme which operates by making a small payment (only just above minimum wage) to workers subject to tax and NICs, followed by a larger payment which is paid as a loan from an offshore account. The First-Tier Tribunal concluded in each case that the loans were not designed to be repaid and as such these schemes constituted tax avoidance schemes, which should have been notified under Disclosure of Tax Avoidance Schemes (DOTAS).
As Spotlight 52 explains, the decisions in these cases confirm the stance of HMRC that contrived arrangements involving loans are tax avoidance schemes which are notifiable under DOTAS. You can read Spotlight 52 in full here: www.gov.uk/guidance/disclosure-of-tax-avoidance-schemes-tax-avoidance-using-offshore-trusts-spotlight-52
What does this mean for recruitment agencies and contractors?
Most umbrella companies operate within the tax rules, but some promote arrangements which constitute disguised remuneration or tax avoidance schemes and this could leave the worker and the recruitment agency at risk.
Tax avoidance schemes can be difficult to spot but if any of the following elements are involved this can be a strong indicator:
- A very small payment which has tax and NICs deducted;
- At the same time, or shortly after, a larger payment which is received without tax and NICs deducted;
- The larger payment might arrive from overseas;
- The payslip might show the larger payment separately or refer to it as something other than pay.
Where can I find a compliant umbrella company?
Take a look at Plus Payroll Services. We pay all income as employment income, with tax and NICs being deducted at source. And don’t just take our word for it, we also appear on Professional Passport’s list of approved providers which means we’ve passed their rigorous compliance checks.
If you’re interested in what Plus has to offer, visit our website at www.pluspay.uk.com or speak to one of our helpful customer service advisors by calling 03333 110 222.
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