Letter from HMRC regarding possible involvement in Tax avoidance Letter from HMRC regarding possible involvement in Tax avoidance
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  1. #1

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    Default Letter from HMRC regarding possible involvement in Tax avoidance

    Hello, apologies if similar thread has been raised before, but i couldn't find one, so i decided to ask my question here.

    I have received a letter from HMRC today suggesting that as an Umbrella employee there's a possibility i might be involved in the tax avoidance arrangements (Spotlight 45: Umbrella companies offering to increase your take home pay (Spotlight 45).

    I am receiving monthly salary for about one third of total amount they pay me via payslip, and the rest two thirds are not reflected there and in the agreement they call it a commission plan.

    I got confused by the letter and decided to forward that to my umbrella company and ask them to comment on this.
    I made some research and on gov.uk site one of the criteria of tax avoidance was - "only a fraction of your salary is paid through payroll and subject to PAYE (indicating that you are only paying tax on some of your income)". This is actually similar to what is happening to me now I guess.

    The umbrella however, came back with the reply that it is just regular phishing (yes that's exact word they used for it) letter from HMRC that now and then is trying to scare contractors and raise concern, and being sent out by them about once a year. Hence my first question: is this correct and you guys receive such letters on regular basis?

    The umbrella also highlighted they are absolutely inline with all the tax law and that their Commission planning is absolutely legal scheme and I should simply ignore the letter as it doesn't accuse me in anything (yet) and doesn't require me anything to do (apart from analysing if i might be taking a part in the tax avoidance scheme). Hence my second question: If anyone of you have received similar email, do you just ignore it? Or is it a sign that HMRC has started some investigation on that umbrella?

    Also, would you consider to change umbrella in current circumstance? Or ask them to rearrange the remuneration scheme they are paying? (which i am not sure if they would agree to do).

    Thanks all in advance for our replies, i am really confused and not sure what to do.

  2. #2

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    Quote Originally Posted by BrickWall5 View Post
    ]Also, would you consider to change umbrella in current circumstance?
    No. I wouldn't consider it. I would just do it.

    It is highly unlikely that the scheme you are in is kosher. Keep all emails and any paper trail. You should also show the header of your email to a trusted IT expert who will tell you whether it is really a phishing attempt.
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    Quote Originally Posted by BrickWall5 View Post

    I am receiving monthly salary for about one third of total amount they pay me via payslip, and the rest two thirds are not reflected there and in the agreement they call it a commission plan.

    I got confused by the letter and decided to forward that to my umbrella company and ask them to comment on this.
    I made some research and on gov.uk site one of the criteria of tax avoidance was - "only a fraction of your salary is paid through payroll and subject to PAYE (indicating that you are only paying tax on some of your income)". This is actually similar to what is happening to me now I guess.

    The umbrella however, came back with the reply that it is just regular phishing (yes that's exact word they used for it) letter from HMRC that now and then is trying to scare contractors and raise concern, and being sent out by them about once a year. Hence my first question: is this correct and you guys receive such letters on regular basis?

    The umbrella also highlighted they are absolutely inline with all the tax law and that their Commission planning is absolutely legal scheme and I should simply ignore the letter as it doesn't accuse me in anything (yet) and doesn't require me anything to do (apart from analysing if i might be taking a part in the tax avoidance scheme). Hence my second question: If anyone of you have received similar email, do you just ignore it? Or is it a sign that HMRC has started some investigation on that umbrella?

    Also, would you consider to change umbrella in current circumstance? Or ask them to rearrange the remuneration scheme they are paying? (which i am not sure if they would agree to do).

    Thanks all in advance for our replies, i am really confused and not sure what to do.
    if you aren't paying tax on all your income you have a problem - and all schemes have a very different viewpoint on tax law to HMRC. Unfortunately for you HMRCs viewpoint is the one that is important and the aim of all scams is to keep you using them until you finally fill in a self assessment form and discover how big a mess you are in.

    So leave now and work out how you can save up the money you undoubtedly owe HMRC

    Oh and I missed the question regarding HMRC - if you have a letter from them and continue to use the Umbrella, the next letter will be far less friendly and start to discuss additional penalties
    Last edited by eek; 15th September 2020 at 19:48.
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  4. #4

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    Quote Originally Posted by BrickWall5 View Post
    Hello, apologies if similar thread has been raised before, but i couldn't find one, so i decided to ask my question here.

    I have received a letter from HMRC today suggesting that as an Umbrella employee there's a possibility i might be involved in the tax avoidance arrangements (Spotlight 45: Umbrella companies offering to increase your take home pay (Spotlight 45).

    I am receiving monthly salary for about one third of total amount they pay me via payslip, and the rest two thirds are not reflected there and in the agreement they call it a commission plan.

    I got confused by the letter and decided to forward that to my umbrella company and ask them to comment on this.
    I made some research and on gov.uk site one of the criteria of tax avoidance was - "only a fraction of your salary is paid through payroll and subject to PAYE (indicating that you are only paying tax on some of your income)". This is actually similar to what is happening to me now I guess.

    The umbrella however, came back with the reply that it is just regular phishing (yes that's exact word they used for it) letter from HMRC that now and then is trying to scare contractors and raise concern, and being sent out by them about once a year. Hence my first question: is this correct and you guys receive such letters on regular basis?

    The umbrella also highlighted they are absolutely inline with all the tax law and that their Commission planning is absolutely legal scheme and I should simply ignore the letter as it doesn't accuse me in anything (yet) and doesn't require me anything to do (apart from analysing if i might be taking a part in the tax avoidance scheme). Hence my second question: If anyone of you have received similar email, do you just ignore it? Or is it a sign that HMRC has started some investigation on that umbrella?

    Also, would you consider to change umbrella in current circumstance? Or ask them to rearrange the remuneration scheme they are paying? (which i am not sure if they would agree to do).

    Thanks all in advance for our replies, i am really confused and not sure what to do.
    Please name the scheme you are in. You will likely get a more definitive answer. But I echo the other sentiments here. Leave now and find a full PAYE umbrella if possible.

  5. #5

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    Quote Originally Posted by BrickWall5 View Post
    I am receiving monthly salary for about one third of total amount they pay me via payslip, and the rest two thirds are not reflected there and in the agreement they call it a commission plan.
    It's a tax avoidance scheme.

    Genuine umbrella companies pay their employees 100% through PAYE (payslip).
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    Quote Originally Posted by dammit chloe View Post
    Please name the scheme you are in. You will likely get a more definitive answer. But I echo the other sentiments here. Leave now and find a full PAYE umbrella if possible.
    There is really no need - if you are seeing anything on a "payslip" where full NI and income tax is not be deducted the OP has a problem.

    That problem would previously have only been revealed when they went to fill in their self assessment form (something that scheme providers try to avoid you doing).

    And for years I have criticised HMRC regarding how late they were about dealing with these sort of problems when often there was enough information available to warn people of the problem. The letter the OP received is HMRC response to that - they now send letters out to scheme members as schemes are identified. Downside of that is if the OP ignores the warning and continues to use the scheme penalties are justified down the line (I think that is mentioned in subsequent nudge letters that are sent later).
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  7. #7

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    Thanks everyone for your time to read this and your advice. I will definitely not leave it like that and will not bin the letter as per my umbrella's recommendation. I have searched through all my emails from them and couldn't find anything more than just vague 'This is how all umbrella companies operate, this is how the service works'.
    I am prepared to seek for legal advice as well, and of course need to find someone else to replace them.
    Last edited by BrickWall5; 16th September 2020 at 12:15.

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    Quote Originally Posted by BrickWall5 View Post
    Thanks everyone for your time to read this and your advice. I will definitely not leave it like that and will not bin the letter as per my umbrella's recommendation. I have searched through all my emails from them and couldn't find anything more than just vague 'This is how all umbrella companies operate, this is how the service works'.
    I am prepared to seek for legal advice as well, and of course need to find someone else to replace them.
    For standard umbrellas Clarity post here, Orca is another one that I (and Lucy even though they are competition seem to) like the management of.

    Ironically while grabbing those links there was an advert which started "Don't be Fooled by 90% returns" which then takes you to an umbrella "comparison" site which is one of the main fronts for the current "umbrella" tax avoidance schemes
    Last edited by eek; 16th September 2020 at 14:30.
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  9. #9

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    Quote Originally Posted by BrickWall5 View Post
    Thanks everyone for your time to read this and your advice. I will definitely not leave it like that and will not bin the letter as per my umbrella's recommendation. I have searched through all my emails from them and couldn't find anything more than just vague 'This is how all umbrella companies operate, this is how the service works'.
    I am prepared to seek for legal advice as well, and of course need to find someone else to replace them.
    unfortunately like thousands you have been duped. You pay tax on a third of your earnings. The other 2/3 is disguised renumeration as HMRC call it.

    1. Move to an Umbrella that subjects 100% of your gross pay to tax.
    2. Keep all documents though not that this will help as its proven you are liable for the tax "probably" - others might have a different opinion but HMRC think you are liable
    3. Surprised you only received this letter today ?... christ you have about 2 weeks to settle. Go speak to an advisor on this and share all your documentation. Its goiong to be painful and you will mostl likely pay the back tax on that 2/3 income. You will have to write off the % charge on your gross income as I think your Umbrella will disappear into thin air and HMRC aint interested in persuing them when you or we are such easy meat.

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    Quote Originally Posted by lowpaidworker View Post
    3. Surprised you only received this letter today ?... christ you have about 2 weeks to settle. Go speak to an advisor on this and share all your documentation. Its goiong to be painful and you will mostl likely pay the back tax on that 2/3 income. You will have to write off the % charge on your gross income as I think your Umbrella will disappear into thin air and HMRC aint interested in persuing them when you or we are such easy meat.
    I don't think this is a loan charge issue - there are plenty of "schemes" tax avoidance scams doing the rounds at the moment - we saw one a couple of weeks ago that seems to have duped the FCSA audit system...
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