Tag: tax avoidance

Spring Budget: Promoters of tax avoidance to face criminal charges

  • People who refuse to stop promoting tax avoidance in the UK could serve time in prison. the Chancellor is expected to announce at next week’s Spring Budget.
  • Fewer non-compliant tax avoidance schemes operating in the market cuts the likelihood of people getting involved with them and facing thousands of pounds in unexpected future tax bills and penalties as a result
  • Part of Chancellor’s commitment to help protect taxpayers and public services.

People who refuse to stop promoting tax avoidance in the UK could serve time in prison, the Chancellor is expected to announce at next week’s Spring Budget.

The UK loses around £400 million per year to marketed tax avoidance, money which could be going towards public services, and it is the users of schemes, including agency workers, contractors and freelancers, who can end up with big tax bills, rather than the promoters who sold it to them.

Wednesday’s expected announcement is part of the Chancellor’s commitment to continue cracking down on those selling tax avoidance schemes to help protect taxpayers and public services.

Chancellor of the Exchequer Jeremy Hunt said: “It is everyday people who lose out from tax avoidance, whether it’s individuals facing big bills after getting involved with harmful schemes or funding being taken away from public services.

“That is why I am determined for promoters to face the music for the damage they cause and the lives they harm by stopping them in their tracks.”

Marketed tax avoidance schemes tempt people into avoidance landing them with unexpected tax bills. Promoters of schemes are behind the schemes, and they often use a network of sellers to help them. Over the last 18 years, they have shifted focus away from wealthy clients towards people on middle incomes. Today the market is dominated by umbrella companies that choose to target contractors and agency workers.

To help everyday taxpayers, HMRC are laser-focused on driving promoters out of business. 31 tax avoidance schemes and 27 of their promoters had been named by HMRC to warn thousands of taxpayers to not to get involved.

There are also already financial penalties in place for promoters who ignore “Stop Notices” and don’t stop promoting.

But the Chancellor is expected to go one step further at the Budget by announcing a consultation that could result with promoters serving time in UK prisons when found guilty in a court of law.

While individuals are ultimately accountable for their own tax affairs, this action will also help up to 2.4 million contractors, including hospital workers, who can become involved in tax avoidance through the agencies they trust to handle their tax affairs. According to HMRC, hospital workers, including those working part-time, are the highest users of tax avoidance schemes in the UK out of any sector.

Fewer non-compliant tax avoidance schemes operating in the market cuts the likelihood of people getting involved with them in the first place, and facing thousands of pounds in unexpected future tax bills and penalties as a result.

Case Study – Tanya, nurse

Tanya got caught up in a tax avoidance scheme and has shared her story as a warning to others.

Tanya is a single parent. She works as a critical care nurse at her local hospital. She found her job through an agency, and they recommended an umbrella company that provided payroll services. Tanya chose an umbrella company that gave her the highest take-home pay. This turned out to be a tax avoidance scheme which she joined. This left her with an unexpected tax bill, on top of the high fees she had paid to the umbrella company for using the scheme.

“I was sold on the benefits of higher pay.”

Tanya explains: “As a nurse I trust my patients and they trust me, that is the relationship of care. I trusted my agency and umbrella company and I feel like they lied to me and scammed me, I thought my umbrella company would care but they didn’t.

“My agency and umbrella company sold me the benefits of higher pay through what they described as their Tax Plan model. This has now left me owing HMRC money and my umbrella company has washed their hands of me, they just disappeared and left me with the tax bills.”

It is unlikely that Tanya will be able to recover the high fees charged by her umbrella company, as they are now seeking voluntary liquidation. She must also pay tax of nearly £7,500 and some interest.

Tanya contacted HMRC and wanted to sort everything out. If she can’t settle her taxes and pay what she owes in one go, she will be offered time to pay her tax bill by instalments.

As well as criminalising promoters of such schemes, the Chancellor is also expected to announce that their directors could be quickly disqualified from directing companies. This builds on the government’s existing work to deter promoters from promoting schemes.

HMRC names avoidance scheme promoters for first time

Tax avoidance schemes have been named for the first time by HM Revenue and Customs (HMRC) as users are warned they could face large tax bills.

HMRC has today advised anyone involved in Absolute Outsourcing’s or Purple Pay Limited’s Equity Participation Scheme to withdraw from them as soon as possible to prevent building up a large tax bill.

This is the first time HMRC has used new powers to name tax avoidance schemes and their promoters as part of a campaign to warn the public not to get caught up in tax avoidance.

Mary Aiston, Director of Counter Avoidance, HMRC, said: “These schemes are cynically marketed as clever ways to pay less tax. The truth is they rarely work in the way the promoters claim and it’s the users that end up with big tax bills.

“New legal powers allow us to name promoters and the schemes they peddle much faster, and this announcement is just the first step. But we need the public to be vigilant, and that’s why we’re also helping people identify, and steer clear, of these schemes through our Tax Avoidance – Don’t Get Caught Out campaign.”

The two named schemes are:

  • Absolute Outsourcing, of Foerster Chambers, Todd Street, Bury, Greater Manchester 
  • Equity Participation Scheme (EPS), promoted by Purple Pay Limited (PPL), of Gracechurch Street, London. 

Both schemes involve individuals agreeing an employment contract and working as a contractor. The schemes pay contractors the National Minimum Wage with the remainder of their wage paid through a loan to try to avoid National Insurance and Income Tax. 

By releasing the details of these schemes, HMRC is letting taxpayers know as early as possible so they can steer clear of them or exit them. HMRC will also regularly update the list by publishing the details of other tax avoidance schemes and their promoters. If a tax avoidance scheme is not shown in the list, this does not mean that the scheme works or is in any way approved by HMRC.

Naming avoidance promoters is one of a number of measures that HMRC is using to help people identify avoidance schemes as a part of the Tax Avoidance – Don’t Get Caught Out campaign. Other tools available to customers to help them steer clear of avoidance schemes include an interactive risk checker and payslip guidance. 

A video highlighting the experience of a critical care nurse who was recommended a tax avoidance scheme through her agency, has also been published by HMRC today. The video explains the risks of becoming involved in a tax avoidance scheme and the warning signs customers should look out for. 

If a customer believes that they are involved in a tax avoidance scheme, they should contact HMRC as quickly as possible by calling 03000 534 226.

Alternatively, if a customer has been encouraged to get into a tax avoidance scheme, has come into contact with someone selling tax avoidance schemes, or has become aware of a scheme, they can report it in confidence through HMRC’s online form. 

This is not a complete list of all tax avoidance schemes currently being marketed or a complete list of all promoters, enablers, and suppliers. There are other schemes, promoters, enablers, and suppliers that remain active, and HMRC will regularly update this list with these details.