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We look at the ongoing issue of tax avoidance being marketed to contractors with the promise of high returns and low risk.

The issue of tax avoidance schemes being marketed to contractors has been a long-standing problem. Over the last 10 years we have highlighted this in almost every response to Government consultations. Following the Loan Charge enforcement there has been an increased focus on this area.

HMRC have published a paper covering research carried out by IFF Research on the subject. This confirms what we have always stated that many of these schemes have been in existence for several years openly marketing themselves and using this as a validation of compliance.

The Low Incomes Tax Reform Group have also published guidance on this subject.

The lack of enforcement leads to a perception of compliance as the layman assumes that if it were not compliant something would have been done to close it down.

This perceived compliance works in the non-compliant company’s favour.

To address this the new legislation is has been written to allow the recover of unpaid debts to be passed to anyone in the supply chain; effectively trying to use this threat as enforcement without carrying out actual enforcement.

This are was further highlighted in a Money Box programme and questioned whether it was right that enforcement seems to ignore the companies that design and promote the arrangements and go after the weaker target of the users.

HMRC also cite their Spotlight publications that highlight avoidance schemes that they are aware of, although these documents are not widely read. Whilst these have covered a wide range of schemes the lack of successful enforcement to support HMRC’s views allows scheme promoters to continue to operate unabated. Spotlight 54 highlights arrangements where promoters are targeting returning NHS workers.

As many of these schemes offer high returns to contractors our compliant providers regularly provide feedback to us on high volumes of business being lost as they are unable to compete with these arrangements.

Many schemes will market themselves as an umbrella arrangement and with no formal definition of an umbrella company these are often taken at face value. A close look at the arrangements easily confirms this is not the case.

Working with The Low Incomes Tax Reform Group we have published a Factsheet to assist contractors in their understanding of an umbrella arrangement and provide warnings on non-compliant offerings. Many providers are now supplying this to new umbrella workers to help them understand the arrangements.

Professional Passport’s compliance standards ensure that all payments made by their umbrella companies are subject to full PAYE and we will not approve a provider where any part of the arrangement involves disguised remuneration of any form.

Professional Passport will also not approve any provider where there is any relationship, formal or otherwise, with any arrangement that falls outside of our compliance standards. Our terms and conditions with our approved providers expressly prohibit any lead or enquiry being passed to any company that has not been subject to review as documented in their compliance report.

We also actively seek feedback from the supply chain to ensure our providers continue to meet the highest operational standards of compliance.

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