Batch of ‘rip-off’ umbrella companies selling ‘abusive avoidance’ to NHS returners

A Money Box investigation has exposed underhand umbrella companies targeting NHS returners keen to fight covid-19, in a way which a barrister told the programme looks like a tax sham.

Dark Blue Professional and Contracting Scout were among the companies named in the radio investigation, which featured a BBC reporter secretly recording the sales pitches of the firms’ staff.

By receiving their wage pack in two parts, either as an investment or as a future bonus, the companies were said to be able to offer the NHS workers take-home pay of between 78% and 85%.

'Loopholes'

Claims of HMRC compliance were made by the companies’ staff, who spoke of leveraging “non-standard payment mechanisms,” or “taking advantage of loopholes” in tax legislation.

But played the recordings, David Pett of Temple Tax Chambers indicated that the numbers didn’t stack up, even stating at one point that the arrangements looked like “abusive tax avoidance”.

Yet on top of the prospect of a tax bill that’s unexpected (one firm called their scheme “a risk” but cleverly dodged who for), there is further financial pain for the hoodwinked workers.

'Rip-off'

Compared to the weekly fee that reputable umbrella companies charge, which the BBC quoted as being £15-£20, “plenty” of the underhand umbrellas were said to be charging £80 a week.

Listeners to the Saturday radio show clearly included Labour MP Ruth Cadbury.

“If you're working as a contractor and [an] umbrella company offers to ensure you get more in your pocket than if PAYE - take care! Rip-offs continue,” she tweeted.

“But HMRC will go for you, not the umbrella company.”

'Sucked in'

Another MP Jesse Norman, the financial secretary to the Treasury, reportedly declined an invitation to appear on the programme, as did HMRC’s boss Jim Harra.  

However on-air, the Conservatives' David Davis told the investigation that the recordings of the convincing sales staff showed how easily people could get “sucked into” such schemes.

The veteran MP also said HMRC have ‘allowed this to go on’ by “going after the small fry…who can’t defend themselves” – individual workers, not the “hard target” – promoters.

'Shocking'

So the UK is “putting money ahead of natural justice,” Mr Davis said of the Revenue, which told the programme that “unscrupulous” umbrellas targeting NHS returners was “shocking”.

Following his appearance, the MP said: "It's time HMRC stopped hounding individuals over the Loan Charge and went after the authors of tax avoidance schemes instead."

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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