May 16, 2023

Tax avoidance schemes continue to blight contractors

There continues to be a lot of noise surrounding tax avoidance schemes in the umbrella company sector, and understandably, contractors and temporary workers are cautious.

But it doesn’t all have to be doom and gloom.

Of the estimated 500 umbrella companies currently operating in the UK, at least 20% hold some form of industry or independent accreditation.

More importantly, we now hear that many end client engagers are asking for proof of accreditation for suppliers to qualify as preferred suppliers.

Contractors must remain vigilant for tax avoidance schemes.

Although tax avoidance schemes have been identified as prominent in the umbrella sector for some time now, HMRC and the UK government have had problems eradicating the issue.

Contractors and temporary workers concerned about being exposed to tax avoidance schemes can take confidence that the government continues to take action.

Changes to legislation have made end client engagers and recruitment agencies potentially liable for tax avoidance schemes if they are found to be present in their supply chain.

The Criminal finances act (2017) stipulates that senior members of an organisation can be found criminally liable for tax avoidance activity within their supply chain. The legislation places the onus firmly upon recruitment business owners and hirers to do their due diligence to ensure its suppliers act compliantly.

HMRC also regularly publishes a list of offenders and tax avoidance scheme promoters. The list can be found here, and we recommend that contractors and temporary workers keep a close eye on any updates.

Victims of tax avoidance schemes hit hard

When asked about the impact of tax avoidance schemes, TJW Contracts Solutions Managing Director, Tracey Williams, stated, “It’s heartbreaking to hear what some contractors and temporary workers have been through.”

She added, “Firstly, they’re accused of avoiding taxes due to schemes they have absolutely no knowledge about. Secondly, they’re exposed to intrusive and traumatic investigations by the taxman and subsequently issued with tax bills and fines, often beyond their financial capabilities.”

Tracey said, “We’ve heard of some awful examples where victims have been so traumatised by the whole experience that they’ve struggled to recover financially and mentally.”

The risks posed by tax avoidance schemes to contractors and temporary workers cannot be understated, and it cannot be stressed enough how important it is for contractors to be vigilant.

If it sounds too good to be true, then it probably is.

TJW Contract Solutions - mitigating the risk of tax avoidance for contractors

At TJW Contract Solutions, we operate a reliable, compliant payroll service that adheres to UK tax law.

Our Professional Passport accreditation means we are audited annually to ensure compliance remains our focus.

If you’re concerned about whether you have been exposed to a tax avoidance scheme, then contact TJW Contract Solutions on 01784 270300