Tax body continues to identify new schemes amid criticism for disclosure rules that sees schemes removed from list
On Thursday 20th April, HMRC added two new schemes to its list of known promoters and enablers of tax avoidance.
Acacia Resourcing Services Limited – registered address Stanmore House, 64-68 Blackburn Street, Manchester – and Marquee Limited – registered at The Charter Building, Charter Place, Uxbridge – have been identified as disguised remuneration schemes, paying their workers via an option grant.
Scheme participants who are paid in such a way do not attract Income Tax or National Insurance deductions, therefore avoiding tax.
The two schemes have been added to HMRC’s list of known promoters of tax avoidance schemes under the Disclosure of Tax Avoidance Schemes (DOTAS) rules. However, these rules have recently attracted criticism from industry experts.
Incomplete list leaves contractors in the dark
Under these rules, schemes identified by HMRC can only remain on the list for 12 months before they are removed from the public domain. Where HMRC hasn’t identified the scheme – but it has been referred either by the promoter or another individual – details remain on the list beyond 12 months.
Prior to the addition of the latest schemes, HMRC had removed two other known operators from its list because the tax office had identified the schemes.
The move attracted criticism, with the rules described as containing a “farcical loophole” that leaves the self-employed at risk of exploitation – and liable for any taxes owed as a result of scheme participation.
The latest additions to the list also raise questions about the rules and processes behind it. Acacia Resourcing Services Limited was first allocated a Scheme Reference Number (SRN) by HMRC on 18th August 2022 – eight months earlier. Similarly, Marquee Limited was allocated an SRN on 2nd November 2022.
This lag between identification and naming leaves self-employed workers further exposed to unscrupulous operators, despite HMRC’s knowledge, or suspicion, that tax avoidance is taking place.
“Be naturally suspicious”
A leading campaigner for self-employed workers, Julia Kermode, has commented on the news. Kermode – founder of IWORK, a body championing independent workers – called on contractors and freelancers to “be careful” and “naturally suspicious” when looking for an umbrella company.
Posting on LinkedIn, Kermode said, “Although I have recently gone on record as saying HMRC’s list is a farce as it removes named companies after 12 months, I am still committed to keeping you informed of their updates.
“This means I will continue to post as soon as I hear about any changes. If by doing this I manage to prevent just one person getting embroiled in a scheme then I’m happy with that.”
“In case you aren’t sure, the schemes on HMRC’s list will usually result in a large tax bill for YOU, the worker or contractor that has signed up to the scheme.”
Kermode also pointed out that being unaware of being involved in a scheme isn’t accepted by HMRC as an excuse, concluding that “they will pursue YOU for the debt anyway.”
While HMRC’s known list of tax avoidance schemes is not exhaustive, freelancers and contractors should check the list before appointing an umbrella company as well as carrying out their own due diligence.
If you think you might be involved in a tax avoidance scheme, you can use HMRC’s interactive risk-checking tool, or contact HMRC to raise your concerns.
If it looks like tax avoidance it is. Contractors should not be greedy. Ban umbrella companies and force temporary workers on PAYE by default. Let individuals justify self employed status by application and payment of a fee.