HM Revenue & Customs (HMRC) has added a further three umbrella companies to its public list of named tax avoidance schemes, as part of its on-going push to deter contractors from working for non-complaint payroll service providers.
The 50-strong list has been updated to include London-based umbrella firm, Edge Umbrella, which found itself in the crosshairs of the Advertising Standards Authority (ASA) in January 2023 for breaking advertising rules by making “misleading claims and omissions” about its tax arrangements.
Computer Weekly contacted the firm for a comment, and also to query if it had any plans to challenge HMRC’s decision to include it on the list, but at the time of writing no response had been forthcoming.
Joining Edge Umbrella on the list is another London-based company, trading as Olympus Contracting, as well as Staffordshire-based firm Hamilton Bradbury. Neither firm was available for comment at the time of writing.
HMRC regularly publishes the names of known tax avoidance schemes online, including details of the parties responsible for promoting or enabling these setups, as well as information on how each scheme reportedly works.
The way it manages the list has seen it come under fire in the past from contracting market stakeholders for previously deleting the details of the firms it has named and shamed 12 months after publication.
At the time, HMRC defended the move on the basis that removing the names was in line with the Finance Act 2021, before going on to state that under the terms of the 2022 version of that legislation, it is possible for firms to have their details persist online beyond 12 months.
On a related note, HMRC won a High Court bid on Thursday 7 September 2023 against three other tax avoidance scheme promotors – Apricot Umbrella, ABC Umbrella and Dalespay – to have their names removed from the list, but their applications were denied by the judge.
Computer Weekly has reported extensively in the past about how IT contractors have inadvertently found themselves embroiled in tax avoidance schemes after joining non-compliant umbrella companies that lure them in with the promise of “too good to be true” take home pay rates.
These non-complaint umbrella companies use contrived methods to artificially minimise the amount of employment tax contractors pay, which includes using non-taxable loans to remunerate them for the work they do in-lieu of a conventional salary.
In recent years, HMRC has sought to clamp down on this practice and recoup the unpaid tax from these setups though the introduction of its controversial loan charge policy, which has seen tens of thousands of IT contractors saddled with life-changing tax bills.
The HMRC list is part of a series of measures the non-ministerial department has introduced to deter others from joining tax avoidance schemes and – in turn – finding themselves on the receiving end of enforcement action and payment demands,
Jonathan Smith, director of counter avoidance at HMRC, said: “Tax avoidance schemes do not work and those who use them may end up with big tax bills – sometimes having to pay far more than the tax they tried to avoid, including interest and penalties.
“We have now put the details of more than 50 tax avoidance schemes on gov.uk and we will continue to publish to help alert customers to these arrangements and the risk of using them.”