Taxman names and shames three more tax avoidance schemes

Three schemes identified and added to HMRC’s list of known promoters as compliance activity continues

HMRC has added three new tax avoidance schemes to its list of known promoters of tax avoidance, bringing the total number of schemes identified to 60.

The most recent update was made on 25 September, with the following schemes added to the list:

• Edge Umbrella Limited, 78 York Street, London, W1H 1DP
• Hamilton Bradbury Ltd., Pacific House, Relay Point, Wilnecote, Tamworth, Staffordshire, B77 5PA
• Olympus Contracting Ltd., 63-66 Hatton Garden, London, EC1N 8LE

While there are 60 schemes on HMRC’s list, there are sometimes multiple entries associated with one scheme. For example, Edge Umbrella Limited has a corresponding Cyprus-based business identified alongside it. Such duplications mean the true number of schemes identified is lower.

The failure to properly tackle the proliferation of tax avoidance schemes is hampered by the disclosure rules. Depending on how a scheme is referred to HMRC, it may be removed from the list after just 12 months – something described by PayePass CEO, Julia Kermode, as “nonsense”.

This “silly legality” means that “the list is never going to be comprehensive”, Kermode added. “Just because something isn’t listed doesn’t mean it’s compliant”, she said, arguing that the failure to properly reflect the scale of the problem leaves self-employed workers at greater risk.

Government to prosecute promoters of tax avoidance

All three of the most recently identified tax avoidance schemes used disguised remuneration. This means that workers using the schemes were paid in such a way as to not incur income tax or national insurance payments on the income. Typically, this means that pay may be disguised as a loan. 

Where payments have been made in this fashion, HMRC has historically pursued the recipient of the payments rather than the promoters of the avoidance scheme for the tax it has lost to disguised remuneration.

The tax authority has faced criticism for this approach, which has long been controversial and is at the heart of the Loan Charge scandal. 

However, the government has recently published draft legislation which proposes new measures that could see persistent promoters of tax avoidance hit with unlimited fines and jail time.

Cohesive regulatory approach emerging?

As well as a bolstered approach to naming and shaming promoters of tax avoidance schemes, HMRC has also shed some light on the work it does with other regulatory bodies to identify tax avoidance schemes.

This includes working with the Committee of Advertising Practice (CAP) and the Advertising Standards Authority (ASA) to identify tax avoidance schemes from their advertising. Firms that make “misleading claims and omissions” about tax arrangements are likely to be identified as tax avoidance schemes – as was the case with Edge Umbrella Ltd.

This collaboration between HMRC, the CAP and the ASA may signal the beginning of a broader and more cohesive strategy to tackle tax avoidance.

The CAP and the ASA have also issued an Enforcement Notice which outlines how companies can advertise tax arrangements. The guidance explicitly states that advertisers must not “state or imply that your arrangement is fully compliant or endorsed by HMRC”.

Protecting yourself from tax avoidance

Alongside regularly checking HMRC’s list of tax avoidance scheme promoters, self-employed workers can also familiarise themselves with the CAP and ASA guidance.

Doing so may make it easier to spot tax avoidance schemes when carrying out due diligence before engaging an umbrella company.If you’re concerned that you might be involved in a tax avoidance scheme, you should contact HMRC as soon as possible. You can also use HMRC’s online tax avoidance risk-checking tool if you’re unsure.