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HMRC now has a blacklist of companies that contractors should stop using, but there’s another way you can spot promoters of tax avoidance schemes.
The government is starting to clamp down on umbrella companies that promise higher take-home pay by using tax avoidance schemes.
To help contractors avoid these companies, HMRC has named scheme promoters for the first time as part of its Tax Avoidance – Don’t Get Caught Out campaign.
But long-awaited umbrella company regulation has so far failed to materialise. This makes it important for contractors to spot the signs of tax avoidance for themselves – but how?
As mentioned above, HMRC has started a campaign to help people spot the signs of tax avoidance.
It’s created a blacklist of tax avoidance scheme promoters – essentially, dodgy umbrella companies.
There are four companies named at the moment:
HMRC is careful to note that the blacklist isn’t exhaustive. It says that there are other companies it can’t publish information about at the moment, either because:
If you’re worried that you’re using a tax avoidance scheme, you should speak to HMRC as soon as possible about your situation.
You can also report tax avoidance schemes to HMRC anonymously.
Some companies that promote or supply tax avoidance schemes will attempt to appear legitimate, so contractors should do thorough research before using them.
ContractorUK highlights the example of Peak PAYE Limited, named on HMRC’s blacklist.
A badge appears prominently on their website, explaining that they’re a member of the ‘Institute of Freelancing and Contracting Professionals’.
But further investigation revealed that many experts have never heard of this organisation.
A self-employed adviser, who declined to be named, told ContractorUK: “This is fairly obviously a very unconvincing attempt to provide a veil of legitimacy to at least one non-compliant operator”.
The institute’s website has a number of red flags, according to ContractorUK. The organisation calls itself a few different names, for example the ‘Independent Freelance Contracting Professionals’.
It also claims to have a ‘complete and detailed’ listing of accredited members, but you can’t access this directory on the website.
ContractorUK explains that while being properly accredited doesn’t always ensure compliance, these organisations are more appropriate third party accreditors:
Do you use umbrella companies? Let us know your experience in the comments below.
Sam has more than 10 years of experience in writing for financial services. He specialises in illuminating complicated topics, from IR35 to ISAs, and identifying emerging trends that audiences want to know about. Sam spent five years at Simply Business, where he was Senior Copywriter.
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