HM Revenue and Customs (HMRC) have named (21st December 2023) another tax avoidance promoter umbrella company using powers from the Finance Act 2022 – the named umbrella is MLG Pay Ltd.
MLG Pay provides an umbrella service to contractors, freelancers, and temporary employees. They claimed to ‘provide a payroll service designed to bridge this gap and guarantee contractors and freelancers get paid in the simplest and most effective manner possible’. They also claimed to provide a ‘Compliant PAYE services’.
So why has HMRC named them and requesting those using the service to check they are not involved in tax avoidance.
How the MLG Pay scheme claimed to work
The scheme user’s total remuneration for their contracts with MLG is artificially separated into two elements.
- The first element is a salary with Income Tax and National Insurance contributions (NICs) deducted.
- The second element is paid without deduction of Income Tax and NICs by MLG. This second element is claimed to be for an option grant or sometimes referred to as ‘benefits in kind’.
Why have HMRC named them?
HMRC’s view is that both elements of the payment should be treated as ‘normal income/as the user’s salary’, and is therefore subject to tax and NICs.
HMRC have previously published Spotlight 60 on Disguised remuneration schemes involving agency workers and contractors employed by umbrella companies.
HMRC are aware that some Umbrella Companies operate more than one scheme, such as a standard compliant scheme and a non-compliant scheme.
HMRC advise employees of MLG to familiarise themselves with the guidance and to satisfy themselves that the correct amount of tax is being deducted on their income.
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 are there to help.
If you’re using this 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.
For the full list of named taxed avoidance schemes see: Current list of named tax avoidance schemes, promoters, enablers and suppliers
PAYadvice.UK 29/12/2023