HM Revenue and Customs (HMRC) have increased the number of named tax avoidance schemes, promoters, enablers and suppliers, update 18th July 2024.
New additions:
If you are involved in any of the tax avoidance scheme contact HMRC as soon as possible. There is more information about how to do this. You can also report a tax avoidance scheme to HMRC.
During June 2024 HMRC ‘named and shamed’ Cube Umbrella Ltd, Mountain View Admin Ltd and 365 Umbrella Ltd.
B2bTradecard Ltd (not an umbrella)
Not the traditionally named umbrella organisation, but promoting a means of manipulating corporation tax and PAYE.
So how did this claim to work?
The arrangements involve companies buying ‘advertising’ services from B2B to connect with other organisations via B2B’s online platform. The companies claim Corporation Tax deductions for the amounts spent on B2Badvertising. B2B then return up to 80% of the advertisement spend to the associated directors or any person chosen by the company via the provision of prepaid debit cards without deductions by the company for income tax or National Insurance contributions (NICs). These amounts are described as ‘loyalty points’ with every 1 point worth £1 to the individual.
HMRC’s view is that the redeemed ‘loyalty points’ are disguised remuneration and as such should be subject to deductions for Income Tax and NICs. Furthermore, it is also HMRC’s view that the advertising amounts paid by the companies to B2B are not allowable deductions for Corporation tax purposes.
New Mill Resourcing Ltd
The arrangements involve individuals providing their services to end clients through New Mill Resourcing Ltd. The individuals receive two payments from New Mill Resourcing Ltd on the same date. The first payment is salary paid at a rate close to the minimum permitted under the National Minimum Wage Act 1998, with Income Tax and National Insurance Contributions (NICs) deducted.
The second payment, described as a ‘Withdrawal amount’ against the individuals company incentive plan report, is paid without the deduction of Income Tax and NICs.
It is HMRC’s position that the whole payment is actually income received in respect of the individual’s services provided through New Mill Resourcing Ltd and Income tax and NICs are payable on it.
Umbrella Zone Limited
The scheme users’ total remuneration for their [employment] contracts with UZL is made in one aggregate payment by UZL. This aggregate payment is artificially separated into two elements. The first element is a salary at a rate of National Minimum Wage or National Living Wage with Income Tax (IT) and National Insurance Contributions (NICs) deducted. The second element is made without deduction of IT and NICs by UZL, even though this element also derives from the users’ economic activities and should therefore be treated as employment income.
It is HMRC’s view that all remuneration paid to employees of UZL is employment income and therefore taxable.
Cube Umbrella Limited
Scheme users sign a contract of employment with Cube Umbrella Limited (CUL). CUL then contracts with employment agencies for the provision of the scheme user’s services. The employment agencies then enter into contracts with end clients for the provision of the scheme user’s services. Scheme users are paid for their services by CUL.
The payment made to the scheme users is made up of two elements. The first element is a salary aspect at a rate around National Minimum Wage/National Living Wage with Income Tax and National Insurance Contributions (NICs) deducted. The second element is made without deductions of Income Tax or NICs.
Mountain View Admin Limited
The scheme users enter an employment contract with Mountain View Administration Limited and provides their services to an end client. Mountain View Admin Limited then pays the scheme users for their services. The payment is artificially separated into two elements. The first element is a salary paid with Income Tax and National Insurance contributions (NICs) deducted. The second element, described as a ‘projected payment’ with no deduction of Income Tax and NICs. This second element had been previously described as a ‘Propelled payment’ also made with no deduction of Income Tax and NICs.
HMRC’s view is that both elements of the payment should be treated as ‘normal income/as the user’s salary’, and therefore subject to Income Tax and NICs.
365 Umbrella Ltd
The scheme users’ total remuneration for their contracts with 365 Umbrella Limited (3UL) 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 sometimes referred to as ‘Grantee’s payments under a conditional annuity purchase agreement’ and is made without the deduction of Income Tax and NICs. 3UL claim that the second element should not count as employment income.
HMRC’s view is that both elements of the payment should be treated as ‘normal income / as the users’ salary’ and therefore subject to Income Tax and NICs.
Spotlight 60
HMRC have previously published a Spotlight on agency workers and contractors employed by umbrella companies Spotlight 60. 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 scheme users to familiarise themselves with the guidance and to satisfy themselves that the correct amount of tax is being deducted on their income.
PAYadvice.UK 25/7/2024