Non-compliance in recent years has put umbrella regulation on new government’s radar
HMRC has added four more tax avoidance schemes to its list of known promoters, enablers and suppliers, bringing the total number of listed schemes almost to 100.
The latest update, published on 5th September, saw the following operators added to the list:
- Everest Contracting Limited (registered at Western Road, Deal, Kent, CT14 6PJ)
- Innovate Limited (registered in the Isle of Man)
- Optima Limited (registered in the Isle of Man)
- Odyssey Payroll Limited (registered address in Chelmsford, England, CM2 0DG)
Self-employed individuals who are involved with these providers are being urged to contact HMRC “as soon as possible”. Details of how to do so can be found here.
The number of schemes identified in recent years indicates the extent of non-compliance in the umbrella sector. While regulation has long been called for, and a consultation held, successive governments have made little meaningful progress.
HMRC “hardly solving the problem”
HMRC began identifying tax avoidance schemes in 2022 and has repeatedly been criticised over its approach, for a number of reasons.
Firstly, there are differing time limits for how long the details of tax avoidance schemes remain in the public domain.
For example, under the disclosure of tax avoidance schemes (DOTAS) rules, tax avoidance schemes can only be placed on HMRC’s list for 12 months – a move which makes it harder for flexible workers to assess whether their provider is compliant.
Speaking last year, following the removal of seven schemes from HMRC’s list due to these statutory time limits, Julia Kermode – former director of the Freelancer & Contractor Services Association (FCSA) – voiced concerns, stating that the removal of schemes “completely undermines the purpose of the list”.
“Publishing a list of tax avoidance schemes is all well and good, but if schemes are being removed more than they’re being identified, HMRC is hardly solving the problem”, she said at the time.
Labour plans shake-up of sector with regulatory reform
However, the new Labour government has already signalled its intention to introduce a series of “legislative and regulatory” reforms to improve tax compliance. While these would not be limited to the umbrella sector, the industry would be an area of strategic focus.
For example, one plan is to reform the DOTAS rules, under which HMRC can identify non-compliant umbrella companies and tax avoidance schemes.
Currently, the government believes the rules are too vague. As such, it would seek to “widen the scope” of them to capture more schemes, as “many schemes are constructed to avoid” the framework.
Similarly, the government has outlined its plans to “allocate […] additional resource” to HMRC to help with “upstream tax compliance”, and specific funding for “strategically important criminal cases…. to ensure we bring back a strong deterrent” for tax avoidance.
Taken in combination, these plans – outlined in the party’s Plan to Close the Tax Gap whitepaper – may put “a greater emphasis on [tax] compliance activity” over the course of parliament.
Leave a Reply