Tax scheme warning for fleets and drivers
【Summary】HMRC warns haulage sector workers about non-compliant umbrella companies selling tax avoidance schemes. These schemes involve giving workers non-taxable payments, promising higher take-home pay. However, most schemes do not work and are challenged by HMRC, resulting in workers having to pay the tax, interest, and potentially 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 about non-compliant umbrella companies selling tax avoidance schemes. Tax avoidance involves trying to pay less tax by bending the rules of the tax system, according to HMRC. Some umbrella companies offer tax avoidance schemes that involve giving workers part or all of their pay in the form of a loan, salary advance, grant, annuity, or other payment that they are told they don't have to pay back. These payments are presented as non-taxable, often without explanation, with the promise of higher take-home pay. However, HMRC states that the majority of these schemes do not work and are successfully challenged in courts and tribunals. Those who join such schemes may end up having to pay the tax due, as well as interest and potentially penalties, on top of the fees they have already paid to join the scheme. HMRC is urging commercial fleet operators to inform their temporary workforce about the risks and warning signs of these tax avoidance schemes, as it not only protects the drivers but also helps protect fleet operators against tax compliance checks, penalties, tax liabilities, and reputational damage.
To spot when an umbrella company is operating an avoidance scheme, individuals should avoid any company that pays part of their salary in the form of loans or other non-taxed payments, claims to significantly reduce their tax liability, makes unrealistic promises about their take-home pay, or tells them that their scheme is approved by HMRC (as HMRC does not approve any umbrella companies or tax avoidance schemes). Additionally, if a company pays more money into an individual's bank account than is shown on their payslip, it may be a sign of an avoidance scheme.
If a worker suspects they have used a tax avoidance scheme, HMRC encourages them to contact them. HMRC aims to help workers get back on the right track and offers support. If individuals cannot afford to pay everything in one go, HMRC may be able to offer them an instalment arrangement to pay the tax and any interest due. For further information and to exit an avoidance scheme, individuals can email HMRC at [email protected].
HMRC regularly updates its educational campaign for contractors working through umbrella companies to help them spot the warning signs of tax avoidance and know what to do if they become involved in an avoidance scheme. The campaign includes a risk checker to help workers identify whether any of their contracts could potentially 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, the published list is not exhaustive. HMRC will continue to provide further details of schemes and their promoters. In addition to naming schemes, HMRC states that it is utilizing its full range of powers to disrupt promoters of tax avoidance and drive them out of business.
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