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Naming and shaming tax avoidance schemes won’t stop loan charge suicides

Loan charge suicides are growing in number/ Photo by Kat Smith via Pexels
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  • Michelle Mone’s husband linked to three tax avoidance schemes 
  • Loan Charge “tragedy” linked to tenth suicide 

UK Business Secretary Grant Shapps’ decision to not implement a single labour market enforcement agency (as opposed to the current system of distinct bodies) could lead to more tax avoidance schemes being set up via the umbrella company industry and related loan charge suicides.

HMRC has added five existing tax avoidance schemes to its online list of tax avoidance promoters, enablers and suppliers – three of which are linked to Michelle Mone’s husband, Douglas Barrowman, it has been reported.

Back in March 2022, HMRC reported that AML Tax (UK) Limited, directed by Arthur Lancaster and part of Doug Barrowman’s Isle of Man based Knox Group, was fined £150,000 after HMRC brought an Upper Tribunal case over the firm’s failure to comply with formal information notices as part of a tax investigation.

The company must now hand over the required records to enable HMRC to calculate the tax owed, which is currently estimated to be more than £3m.

The news of yet more tax avoidance schemes connected to Barrowman comes just two months after Conservative peeMichelle Mone and her children “secretly received £29m originating from the profits of a PPE business that was awarded large government contracts after she recommended it to ministers,” documents seen by the Guardian have indicated.

“Lady Mone’s support helped the company, PPE Medpro, secure a place in a “VIP lane” the government used during the coronavirus pandemic to prioritise companies that had political connections. It then secured contracts worth more than £200m,” reported The Guardian in November 2022.

The Guardian later reported that Ultimo lingerie brand founder Mone and her husband could be linked to other government contract-related lobbying that has resulted in considerable personal financial gain.

Loan charge suicides are rising

Also, this week news broke of a tenth suicide reportedly linked to the controversial Loan Charge – a retrospective tax charge issued to tens of thousands of temporary and contract workers who often unknowingly operated via tax avoidance schemes.

Experts have welcomed HMRC naming these schemes, but urged the government to “take decisive action” and put a stop to them “once and for all”.

Fred Dures, founder of PayePass (umbrella company payroll auditor), said “the more tax avoidance schemes that are named and shamed the better. It means fewer individuals, recruiters and businesses engaging flexible workers are at risk. 

Even so, this list barely scratches the surface. It still doesn’t call out the major players posing the biggest threat and avoiding the most tax, either. And I’ve no doubt that HMRC has a firm idea of these schemes. 

Fred Dures, PayePass

“The government showed its hand recently, ditching plans to introduce a Single Enforcement Body,” said Dures. “This held the key to umbrella industry regulation – vital in preventing these illegal operations and fundamental to the Treasury collecting billions in missing tax,” he said.

“So while I’m glad some tax avoidance schemes are being called out, I can’t help but wonder if the government is all that serious about putting a stop to them once and for all,” said the contractor services industry executive.

Why are workers not being protected?

Julia Kermode, founder of IWORK, warned workers to not be reliant on recruiters being compliant when it comes to tax avoidance schemes run through umbrella companies

Julia Kermode, founder of IWORK a lobby group for temporary workers, said the growing list of tax avoidance schemes is a good starting point, but it doesn’t reach a wide enough audience – which is why it’s vital to get the message out there. 

“More could and should be done to protect temporary workers and the wider supply chain from these rogue umbrella companies,” said Kermode. “It’s far too easy to fall into the trap of working through one without realising it. Often, the first temps know about it is when they’re hit with a devastating tax bill,” she said.

“Don’t assume that recommendations made by all recruiters are compliant – many of these schemes can afford to pay agencies huge kickbacks for referrals.

Julia Kermode, IWORK

The temp worker rights advocate also commented on the latest news of yet another loan charge-related suicide.

“This is tragic,” said Kermode. “The government has failed these people and their families on an industrial scale. It’s abhorrent that HMRC continues to hound thousands of other temps, freelancers and contractors for tax under the Loan Charge, without any regard for the devastation being caused,” she said.

“The government has a lot to answer for. HMRC has flouted its own rules by holding the individual responsible for unknowingly working through tax avoidance schemes – this is despite the agency legislation, which would see agencies liable for tax avoidance,” said Kermode.

The Loan Charge is a conscious decision from HMRC to circumvent the regulations it created, to pursue individuals rather than businesses. We’re not just talking about a few isolated incidents, either. This is a deliberate move from HMRC to aggressively chase tens of thousands of people for sums that often amount to hundreds of thousands of pounds.

Julia Kermode, IWORK

“I can’t comprehend it. This is an appalling situation, yet the government ploughs on with its head buried in the sand. A resolution must be agreed to prevent any more needless losses.”

Fred Dures, the founder of payroll auditor, PayePass, asked: “When will this end? Lives are being lost because the government fails to take responsibility for this huge injustice. Thousands of contractors were targeted by tax avoidance schemes and had no idea they were working illegally – but the government continues to pursue them for eye-watering sums.

Dures said, “one suicide would have been too many, but now with ten confirmed, everyone involved in enforcing the Loan Charge should be ashamed.”

Dures said that he believes that those in power were “well aware that the recovery of the alleged shortfalls in tax from individuals employed via tax avoidance schemes was grounded on questionable legal principles, yet they ploughed on regardless.” 

“Worse still,” Dures added, “these schemes still exist. The main players and serial offenders are well known in the sector and to HMRC. The crooks behind tax avoidance schemes have become extraordinarily wealthy by abusing the people who trusted them.”

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