Tax scheme warning for fleets and drivers
【Summary】HMRC warns temporary workers in the haulage sector about non-compliant umbrella companies selling tax avoidance schemes. These schemes involve giving workers non-taxable payments, promising higher take-home pay. However, most of these schemes do not work and are challenged by HMRC. Those who join these schemes end up having to pay the tax due, plus interest and penalties. Fleet operators are encouraged to inform their temporary workforce about the risks.
HM Revenue & Customs (HMRC) has issued a warning to temporary workers and contractors in the haulage sector regarding non-compliant umbrella companies selling tax avoidance schemes. Tax avoidance involves attempting to pay less tax by bending the rules of the tax system, according to HMRC.
HMRC explained that some umbrella companies offer tax avoidance schemes that involve giving workers their pay in the form of a loan, salary advance, grant, annuity, or other payment that they are told they do not have to repay. These payments are presented as non-taxable, often without explanation, with the promise of higher take-home pay.
However, HMRC stated that the majority of these schemes do not work and are successfully challenged by the organization in the courts and at tribunals. It warned that individuals who join these avoidance schemes end up having to pay the tax due, as well as interest and potentially penalties. This means that those who engage in tax avoidance may end up paying significantly more than the tax they initially tried to avoid.
HMRC is urging commercial fleet operators to inform their temporary workforce about the risks and warning signs of these tax avoidance schemes. By doing so, HMRC aims to protect drivers and help fleet operators avoid tax compliance checks, penalties, tax liabilities, and reputational damage associated with using workers involved in such schemes.
To identify if an umbrella company is operating an avoidance scheme, individuals should avoid companies that pay part of a worker's salary in the form of loans or other non-taxed payments, claim to significantly reduce a worker's tax liability, make unrealistic promises about take-home pay, or falsely state that their scheme is approved by HMRC. Workers should also be cautious if a company deposits more money into their bank account than is shown on their payslip.
If a worker suspects they have used a tax avoidance scheme, HMRC encourages them to contact the organization. HMRC aims to help workers get back on track and offers support. If a worker cannot afford to pay everything at once, HMRC may be able to arrange an installment plan for tax payment and any interest due.
HMRC regularly updates its educational campaign for contractors working through umbrella companies to help them identify the warning signs of tax avoidance and know what steps to take if they become involved in an avoidance scheme. The campaign includes a risk checker to assist workers in determining if their contracts may involve tax avoidance.
Since April 2022, HMRC has been publicly naming tax avoidance schemes and their promoters to help taxpayers avoid or exit such schemes. However, this is not an exhaustive list of all currently marketed tax avoidance schemes or all promoters, enablers, and suppliers. HMRC will continue to provide further details on schemes and their promoters. Additionally, HMRC states that it is using its full range of powers to disrupt promoters of tax avoidance and force them out of business.
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