Legislative “loophole” leaves self-employed unprotected against schemes
HMRC has come under fire for removing seven more tax avoidance schemes from its list of known non-compliant operators.
The schemes were removed because information about them had been included on the list for 12 months. This is the maximum time limit for schemes identified by HMRC under the Disclosure of Tax Avoidance Scheme (DOTAS) rules.
However, while the removal of schemes is mandated by legislation (Finance Act 2021), critics say that unsuspecting contractors may inadvertently end up working through them. This leaves these workers at greater risk of tax non-compliance – and liable for any unpaid taxes as a result.
Alongside the seven promoters removed from the list, three more were added. Easyway Umbrella Limited was added on the 27th July. Then, on the 2nd August, Apricot Umbrella Limited and Countrywide Partners Limited also joined the list.
Constant changes make compliance challenging
Schemes are added to HMRC’s register, either when referred under the Disclosure of Tax Avoidance Schemes (DOTAS) or the Promoters of Tax Avoidance Schemes (POTAS) rules. Guidance on gov.uk indicates that each set of rules carries different maximum time limits.
Information about schemes identified under the DOTAS rules remains in the public domain for a maximum of 12 months. This is the case if a scheme is provisionally designated by HMRC.
However, if the same scheme is referred to HMRC by a promoter (or someone else), there is no time limit that dictates how long its information can stay on the list. Meanwhile, schemes issued a Stop Notice under the POTAS rules are also subject to no maximum time limits.
This is just the latest instance of schemes being removed from the list. Earlier this year, HMRC removed two other named tax avoidance promoters which had reached the 12-month limit under the DOTAS rules.
Industry experts, though, say that removing schemes makes it more difficult for self-employed workers to steer clear of tax avoidance schemes.
“Three steps forward, seven steps back”
Julia Kermode has represented the interests of the contingent workforce in various roles, including having served as chief executive of the Freelancer & Contractor Services Association (FCSA).
In her current capacity as CEO of PayePass – a provider of umbrella payroll auditing software – she has continually campaigned for greater regulation of the sector.
Kermode was scathing of the latest removals from HMRC’s list, suggesting that the current legislation “completely undermines the purpose of the list”.
She also suggested that it was a case of “three steps forward, seven steps back”.
Labelling the nuance a “ridiculous loophole in the legislation”, Kermode also said that she “can’t understand the logic behind it whatsoever”.
“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.
Kermode went on to voice concerns about whether “the government is doing enough to make sure this list reaches enough people and businesses” to raise awareness of identified schemes. She also called for greater regulation, concluding: “The more that is done to put a stop to these unlawful, immoral schemes, the better.”