HMRC lists MLG Pay Ltd as a tax avoidance scheme contractors should avoid

HMRC has listed MLG Pay Limited as the latest tax avoidance scheme that contractors should withdraw from or avoid using.

Naming the Sidcup firm during the Christmas break, HMRC said MLG contractors have had their remuneration “artificially separated”.

But what’s also artificial is the terminology which MLG Pay Ltd, and by extension HMRC, used to describe the ruse, says Clarity Umbrella.

'Rephrased'

“‘This second element is claimed to be for an ‘option grant…’” Clarity’s boss Lucy Smith said, quoting HMRC’s entry of MLG.

“So, the term ‘Loan Scheme’ has now been rephrased to ‘Option Grant.’ Just one more thing [for contractors] to look out for!”

But as with many of the schemes which HMRC blacklists, “the horse has already bolted,” WTT Group’s Tom Wallace told ContractorUK.

'Many contractors to potentially suffer at HMRC's hands'

“[This potentially leaves] many contractors to suffer at the hands of HMRC for the missing tax already accumulated,” Wallace warns.

An ex-tax official, Wallace believes a “much more real- time system is required” if HMRC is to protect contractors and the coffers properly. 

He said: “Barriers to [HMRC] publication [must be] removed so promotors cannot obstruct and delay…their details [being uploaded], which leads to further tax losses in the interim.”

'Boring it may be, but check your personal tax account with HMRC'

Julia Kermode at PayePass echoed the importance of contractors not waiting on the Revenue’s list to find out if something’s off.

“Make sure you regularly check your personal tax account with HMRC to make sure they are receiving the tax and NICs you expect from your PAYE income,” PayePass’s CEO told ContractorUK, then acknowledging:

“Yes, I know it's boring. But doing both these things could provide an early warning that something is amiss and ultimately prevent you receiving an unexpected future tax bill.”

'HMRC strongly advises you to withdraw'

Since the addition to HMRC’s blacklist of MLG Pay Ltd (Company number 13638833), the department has removed three schemes (on Jan 11th).

A bugbear of Kermode’s, removal from the blacklist is made “in line with requirements of the Finance Act 2021,” HMRC said.

From the same online page, the department urged: “If you’re using any of the schemes shown on the lists or similar schemes, HMRC strongly advises you to withdraw from them and settle your tax affairs to prevent building up a large tax bill.”

'Unsuspecting contractors'

The founder of IWORK, Kermode believes that as most schemes target “unsuspecting contractors”, the HMRC alert is, on balance, welcome.

She addressed contractors yesterday: “It's a timely reminder that you should always check your payslips, every single time you receive one -- and query anything that is not standard payroll.”

To determine if a lawful reduction to the tax which umbrella contractors pay has been made, Martin Brown of ADVANCE is also encouraging contractors to review their payslips.

'Make sure the correct rates are applied'

“Umbrella workers must check their payslips…[because at Autumn Statement 2023] the government announced a reduction to the main rate of National Insurance contributions paid by employees from 12% to 10% with effect from January 6th 2024.”

“All employees, including umbrella employees, will now pay 10% on earnings between £242 and £967 a week and 2% on all earnings above £967 a week.

“Although the reduction isn't going to give you enough extra pay [to] take you on holiday, it is important to make sure the correct rates are applied and an increase in your pay is given.”

Taking to LinkedIn, Brown recommended brolly contractors compare their take-home pay on any payslip from w/c Jan 8th, against a prior payslip, but said all other details should be “like for like.”