HMRC have added new names to their list of Tax Avoidance promoters.
Some of these umbrella companies arrangement use an unusual structure utilising users’ Personal Service Companies (PSC).
ABC Umbrella Ltd
The arrangements involve individuals providing their services to end clients or agencies through ABC Umbrella Limited as their employer.
The individuals also enter an agreement with Krevit Ltd where individuals grant the right to enter an Annuity Agreement in exchange for payments (the Grantee Payments).
The individuals receive payment from ABC Umbrella Limited. However, tax and National Insurance contributions (NICs) are only deducted on a small part of the amount. This is evidenced on the payslips and figures reported to HMRC.
It is HMRC’s view that the larger amount, paid without tax or NICs deducted, is for the Grantee Payments, but paid by ABC Umbrella Limited on behalf of Krevit Ltd. It is also HMRC’s view that the Grantee Payments are additional disguised income for services provided by individuals through ABC Umbrella Limited, and the entire payment should therefore be subject to tax and NICs.
IP Global Consulting Ltd
IP Global Consulting Ltd (IPG) invoices a recruitment agency for the services provided by a scheme user. On receipt of payment from the recruitment agency, IPG pays a National Minimum Wage amount to the user with tax and National Insurance Contributions (NICs) deducted. IPG also makes a second payment to the user, described as an ‘advance’, without tax or NICs deducted.
Payeworx Ltd / Contractor Buddy PCC Limited
The scheme user enters into an employment contract with Payeworx (PWL), and the scheme user’s Personal Service Company (PSC) is issued a share in Contractor Buddy PCC Limited (CBP), a connected protected cell company based in the Isle of Man (IOM).
PWL pay the scheme user a salary that is around the minimum amount required by the National Minimum Wage Act 1998.
CBP make a separate larger payment without deducting Income Tax and National Insurance Contributions to the scheme user’s PSC, supposedly for a dividend.
CBP deduct around 2% from the larger payment as a fee, and a further 19% which they claim is Corporation Tax (CT). However, the rate of CT in the IOM is 0%. The scheme users are expected to distribute the alleged dividend amount as they see fit.
SmartPay Limited
SmartPay (IOM) signs an employment agreement with the scheme user and a contract for services with SmartPay (UK).
The user also enters into a ‘facility agreement’ with Smartpay (IOM), acting as trustee for a related trust whereby the user is provided with a loan facility.
SmartPay (UK) then enters a contract for services with a recruitment agency for the user’s services.
The recruitment agency then enters a contract for services with the end client.
The end client pays the recruitment agency for the scheme user’s services, who in turn pay SmartPay (UK).
Following the deduction of a fee, SmartPay (UK) pay the remaining amount to SmartPay (IOM).
SmartPay (IOM) pays a salary in line with the National Minimum Wage Act to the scheme user and a payment described as a loan which is made without deductions of income tax or national insurance contributions.
If you’re involved in a tax avoidance scheme
If you’re worried about becoming involved in a tax avoidance scheme, or think you’re already involved and want to get out of one, HMRC is there to help.
If you’re using any of the schemes shown on the lists or similar schemes, HMRC strongly advises you to withdraw from them and settle your tax affairs to prevent building up a large tax bill.
If you’re already speaking to someone in HMRC about your use of a tax avoidance scheme, you should contact them to discuss this further.
If you do not have an HMRC contact and you want to get out of a tax avoidance scheme contact HMRC
Report a tax avoidance scheme to HMRC
You can report tax avoidance schemes and those offering you the schemes to HMRC. You can do this by using the report tax fraud or avoidance online service.
You can submit this form anonymously. You do not have to give your name, address or email.
If you cannot use the online form, you can contact HMRC.
The full list
For the full list of named tax avoidance scheme promoters see:
PAYadvice.UK 25/8/2023