HMRC defends removing names of known tax avoidance schemes from public list

HM Revenue & Customs (HMRC) has defended its rationale for deleting names from its official on-line list of known tax avoidance schemes after 12 months after contracting market stakeholders described the technique as “ridiculous”. 

The tax assortment company manages a web-based list of named tax avoidance schemes, which additionally consists of particulars of the events liable for selling and enabling these setups to function and data on how every scheme reportedly works.

There are 34 known tax avoidance schemes listed on the newest model, which was final up to date on 5 April 2023.

However, that replace is known to have resulted within the names of two organisations being eliminated from the list, according to the Finance Act 2021, which states the names of schemes have to be unpublished 12 months after they’re first added.

This is a state of affairs that has garnered criticism in current days, with Julia Kermode, founder of unbiased employee consultancy IWork, describing the laws that permits the names of these entities to be eliminated from public report after a 12 months as “particularly ridiculous”.

“Naming a tax avoidance scheme only to delete it from an official list a year later is crazy. How can anyone steer clear of tax avoidance schemes when HMRC’s own list isn’t up to date? It’s beyond belief,” she mentioned. “This list isn’t a deterrent for tax avoidance schemes – it’s merely a temporary blip in the history of these so-called companies.” 

Computer Weekly has reported extensively previously about how IT contractors have inadvertently discovered themselves embroiled in tax avoidance schemes after becoming a member of non-compliant umbrella corporations that lure them in with the promise of “too good to be true” take residence pay charges.  

These non-complaint umbrella corporations use contrived strategies to artificially minimise the quantity of employment tax contractors pay, which incorporates utilizing non-taxable loans to remunerate them for the work they do in-lieu of a standard wage.

In current years, HMRC has sought to clamp down on this follow and recoup the unpaid tax from these setups although the introduction of its controversial mortgage cost coverage, which has seen tens of 1000’s of IT contractors saddled with life-changing tax payments.

The HMRC list is a component of a collection of measures the non-ministerial division has launched to discourage others from becoming a member of tax avoidance schemes and – in flip – discovering themselves on the receiving finish of enforcement motion and cost calls for,

Kermode added: “These schemes wreck lives. They lure in unsuspecting individuals upon the pretence that they are legal and compliant. Then, when HMRC comes calling, the individual is left with a devastating tax bill. Meanwhile, the scheme, along with the people running it, have disappeared into thin air.”

Fred Dures, founder of payroll auditing firm PayePass, mentioned the state of affairs could be “laughable, if it wasn’t so serious” and that removing the names one 12 months after publication is “appalling” behaviour.

“What’s more, the government has only been naming and shaming these schemes for one year. Fast forward a few weeks and months and, at this rate, the list will continue to shrink. It’s one step forward, two steps back – a farcical loophole,” mentioned Dures.

“Few will deny that the umbrella industry needs regulating, yet the government still hasn’t delivered it. It means the responsibility will continue to fall on businesses engaging umbrella companies to ensure compliance and operate transparent payment processes.”

In a press release to Computer Weekly, an HMRC spokesperson responded to the claims above and mentioned its publication technique does have a disruptive impact on the scheme promoters.

“We ensure that all aspects of our promoter naming complies with the relevant legislation, including removing scheme names one year later in line with Finance Act 2021,” the spokesperson mentioned.

“Naming schemes has had a disruptive effect on promoters of tax avoidance. Schemes can also be named under Finance Act 2022 and details can stay online beyond 12 months. This will continue to warn taxpayers, so that they can steer clear of them.”