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HMRC research into tax avoidance schemes branded “a waste of time”

Fred Dures of PayePass
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OPINION

By Fred Dures, PayePass

HMRC’s commissioned research into disguised remuneration schemes has been described as a “waste of time” with the assessment of the impact of tax avoidance schemes failing to represent the reality of the situation – this is according to specialist umbrella payroll auditing provider, PayePass.

This report was a painful read. The exercise was a waste of time, not to mention taxpayers’ money. Most of the data, for example, is more than 18 months old. Why did it take until September 2022 for the findings to be published and then published with such old data? 

To be frank, the threat of tax avoidance schemes – and the danger they pose to contractors, along with recruiters and end-clients – is much greater than what this report suggests. 

In my opinion, the hopefully soon-to-be-reversed reform to IR35 in the private sector in 2021 directly led to an increase in tax avoidance schemes – as reform did in the public sector in 2017. Yet still, HMRC refuses to acknowledge that these ill-thought-out changes have been a major contributing factor to the wave of non-compliant umbrella companies entering the market. HMRC must shoulder a large portion of the blame.

It’s why we must keep banging the umbrella regulation drum. Regulating this industry would go a long way to stopping tax avoidance schemes once and for all. However, the reality is that regulation doesn’t look like it’s coming any time soon. As a result, experts in the sector have no option but to take it upon themselves to raise standards, with impacted parties carrying out their own enhanced due diligence to ensure compliance.

Perhaps a better use of resources and taxpayers’ money would be to publish current data and report on the fundamental reasons why tax avoidance schemes have such a hold over the UK’s contractor workforce.

The report, titled ‘Contractors and Disguised Remuneration’ summarises highly questionable key findings from two strands of research (which took place between March and May 2021), including:

  • Nearly half of umbrella workers (45%) look to HMRC for tax advice
  • Expertise and honesty were the most frequently mentioned reasons for umbrella workers seeking tax advice from HMRC.
  • 3 in 10 (31%) of contractors and umbrella workers have been offered or informed about at least one way of managing their tax which was described in a way that made it seem like a tax avoidance scheme.
  • Nearly half of contractors and umbrella workers who are aware of IR35 reform, for example, have been offered potential tax avoidance schemes to avoid the rules.
  • The most common reason for people signing up for these schemes is that they seem legal on the face of it. 

Are you a freelancer or freelance economy service provider who has an opinion that can be backed up with facts, case studies and industry insights? Write in with your guest article proposal to editor@freelanceinformer.com

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