Tax avoidance in the news again

A new story has emerged through the BBC of a large UK recruitment agency and contractor accountancy provider operating a tax avoidance scheme. This scheme has been described as ‘aggressive’ and abuses the Employment Allowance that was recently introduced.

The Employment Allowance came in to place for the 2014-15 tax year to give employers a tax break on Class 1 National Insurance Contributions (NIC’s) and was intended to encourage small businesses to take on more workers. The scheme could save small businesses and charities up to £2,000 per annum in Employers NIC’s. The Employment Allowance can only be claimed for one PAYE scheme and only one company or charity in a group can claim the allowance.

HMRC have received evidence that shows the recruitment agency has been actively selling the scheme that creates multiple companies to pay agency workers. In order to dodge paying Employers NIC by claiming the Employment Allowance, each company is suggested to be independent of the others with its own PAYE scheme. There could be as many as 1,500 companies created in recent months for use in the tax avoiding scheme.

Julia Kermode of the Freelancer & Contractor Association (FCSA) has commented on this:

“I am very concerned to hear about such practice taking place, and I would like to emphasise that FCSA does not condone these tax avoidance schemes, nor does it represent any firm operating them.”

Tax avoidance schemes should be avoided, we strongly recommend to stay well clear of any schemes that seem too good to be true. You may receive emails and other marketing correspondence claiming that they can help you increase your take home pay, these probably relate to tax avoidance schemes. I would seek advice from a different accountant if you receive such correspondence.

You should pick your accountant based on the quality of the services that they provide, ensuring that they are highly compliant. If you operate through a tax avoidance scheme it may just come back to haunt you!

This article was provided by Gorilla Accounting.

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