Tax scheme warning for fleets and drivers
【Summary】HMRC warns temporary workers and contractors in the haulage sector about non-compliant umbrella companies selling tax avoidance schemes. These schemes involve giving workers their pay in the form of non-taxable loans or advances, promising higher take-home pay. However, HMRC states that these schemes do not work and are successfully challenged in court. Joining these schemes can result in having to pay the original tax, plus interest and penalties.
HM Revenue & Customs (HMRC) has issued a warning to temporary workers and contractors working 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. The tax avoidance schemes offered by some umbrella companies 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 states that the majority of these schemes do not work and are successfully challenged by the organization in courts and tribunals. 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 considerably more than the tax they originally 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. This not only protects drivers but also helps fleet operators avoid tax compliance checks, penalties, tax liabilities, and reputational damage associated with using workers involved in tax avoidance schemes.
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 worker receives more money in their bank account than what is shown on their payslip, it may indicate an avoidance scheme.
If a worker suspects they have used a tax avoidance scheme, HMRC encourages them to contact the organization. HMRC aims to guide workers back on the right track and offer support. If individuals cannot afford to pay everything at once, HMRC may be able to arrange an installment plan for payment of the tax and any interest owed. For further information and assistance in exiting an avoidance scheme, workers can email HMRC at [email protected].
To protect themselves, workers can rely on HMRC's educational campaign, which is regularly updated and specifically designed for contractors working through umbrella companies. The campaign helps individuals identify warning signs of tax avoidance and provides guidance on what workers should do if they become involved in an avoidance scheme. It includes a risk checker to help workers determine if any of their contracts could potentially involve tax avoidance.
Since April 2022, HMRC has been publicly naming tax avoidance schemes and their promoters to assist taxpayers in avoiding or exiting 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 publish 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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