Tax Avoidance Schemes

At Payroll 4 Contractors we understand the seriousness of tax avoidance schemes, we’re here to help you avoid these schemes.

ABOUT TAX AVOIDANCE SCHEMES

HMRC takes the issue of tax avoidance in the UK very seriously and there is always a risk in using solutions that exploit loopholes and inconsistencies in tax legislation.

We understand how tempting it can be to increase your net income. However, if a business increases your take-home pay and typically returns more than 75% of the value of your contract, then the business may be classed as a tax avoidance scheme by HMRC.

Although you may be told that a solution is fully HMRC compliant, legal, and has been vetted by HMRC, HMRC considers such solutions to be tax avoidance and actively states that they do not work. HMRC will not sanction anything that it considers to constitute tax avoidance.

HMRC states that if they consider that a payment you receive breaches tax law, you (as a taxpayer) risk paying additional tax, interest and penalties. Using such solutions involves risks, such as:

The umbrella company must declare your taxable income to HMRC when it pays you. This means HMRC has a list of all its employees. HMRC has a clear list of people they can contact if they believe the company is engaging in a tax avoidance scheme.
HMRC can then tax you on any untaxed income.
As any investigation by HMRC could take years, it will also charge interest from the date the income becomes taxable and impose penalties for late payments.
HMRC says it is the responsibility of the taxpayer, not the solution provider, to ensure tax is paid correctly.
Most of these umbrella companies charge a portion of their fees as a commission for providing the solution.

Depending on their nature, entering into loan agreements with these companies may result in requests for payment (and accrued interest) from the solution provider.
Many of these companies have been in business for a few years and then close, leaving you with no way to contact them if you need help with an HMRC enquiry.
A company with such permission can buy the loan book and then the company will come to you to repay the loan.
Companies holding these funds, which are considered assets in their accounts, can borrow against them.
HMRC is working hard to crack down on tax avoidance schemes and introducing new legislation to challenge the use of tax avoidance schemes.