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 loans or other non-taxed payments, promising higher take-home pay. However, HMRC states that these schemes do not work and are successfully challenged in courts. Those involved in tax avoidance may end up paying more than the tax they originally tried to avoid.
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, as explained by HMRC. 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 non-repayable payment. 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 court. Those who join these schemes end up having to pay the tax due, along with interest and potentially penalties, in addition to 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 tax avoidance schemes. By doing so, they can protect both the drivers and themselves against tax compliance checks, penalties, tax liabilities, and reputational damage caused by using workers involved in tax avoidance schemes. To help workers identify when an umbrella company is operating an avoidance scheme, HMRC advises avoiding 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 claim to be approved by HMRC. Workers should also be wary if more money is deposited 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 them. HMRC's aim is to guide workers back on the right track and offer support. If a worker cannot afford to pay everything at once, HMRC may be able to arrange an installment plan for paying the tax and any interest due. Workers can reach out to HMRC by emailing [email protected] for further information and assistance.
To protect themselves, workers can rely on HMRC's educational campaign specifically designed for contractors working through umbrella companies. This campaign provides information on how to identify warning signs of tax avoidance and what workers should do if they find themselves caught up in an avoidance scheme. It includes a risk checker to help workers determine if any of their contracts could 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 list is not exhaustive. HMRC will continue to publish further details of schemes and their promoters. Additionally, HMRC states that it is using its full range of powers to disrupt promoters of tax avoidance and drive them out of business.
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