Our friends at the Low Income Tax Reform Trust (LITRG) have very firmly told the government that there continues to be a particular problem with agency workers getting caught up in disguised remuneration schemes. In their response to HMRC’s consultation on tackling disguised remuneration, LITRG say that the issue is largely driven by PAYE avoidance by the employer (often an “umbrella” company), rather than the workers themselves seeking to avoid tax.
HMRC therefore need to tackle the schemes at umbrella company level, LITRG give several examples of what HMRC could do:
- in conjunction with ASA, intervene when they see false advertising
- require PAYE security deposits from certain umbrellas (to weed out potentially problematic firms)
- use their new joint and several liability powers to prevent “pheonixing” (where firms become insolvent and then reform under a new guise, leaving behind debts in the old company)
- have a senior HMRC person with responsibility for umbrellas, under whom an action plan to tackle non-compliance could sit
- increase onus on others within the supply chain (such as agencies and end-hirers) to do more to ensure compliance
- public sector procurement contracts for temporary workers should explicitly dictate tax law compliance
The report notes that debt transfer provisions and/or the Criminal Finances Act 2017 could be helpful in encouraging greater compliance throughout the supply chain. Furthermore, the new legal requirement for agency workers to receive Key Information Documents should have an important role in preventing workers becoming involved in schemes.
Here at iwork.co.uk we very strongly support LIRTG’s response to the consultation. There is undoubtedly a problem with firms purporting to be umbrellas, but which are in fact nothing more than a tax avoidance scheme. Such schemes produce extremely convincing marketing literature full of false promises and compliance claims so it is easy to see how someone could unwittingly sign up to them. Anyone that is new to working independently is particularly vulnerable to exploitation by these schemes, as we saw earlier this year when returning to work NHS staff were aggressively targeted.
It is very frustrating that HMRC seem almost powerless to deal effectively with the scheme promoters, particularly as it is widely known to be the same named individuals linked with many of them. We very much hope that the latest government consultation will bring about some tangible results and finally rid the sector of the dubious providers once and for all.
