HMRC in new call to help it tackle disguised remuneration

A new call for evidence to tackle disguised remuneration has been sounded by HMRC, in what experts say is a tacit admission that the taxman has loan schemes far from sewn up.

In a 42-page PDF, HMRC says it wants to hear from anyone who has used a scheme or even received marketing from such a scheme, to help it take action “beyond its planned approach.”

The four words are vital, because they imply the Revenue is unwilling to entertain previously tabled ideas, or any deviation from the in-force Loan Charge and its September 30th deadline.

'Avoid destitution and bankruptcy'

But in the House of Lords on Friday, Baroness Kramer was among those implying the current framework needs fixing, before a subsequent one ought to be explored, let alone drawn up.

“We still urgently need a rational basis for settlement under the loan charge of ‘open years,’” she said, “something that would avoid destitution and bankruptcy [for taxpayers].”

Similarly finding fault with the current way to tackle disguised remuneration, Lord Goddard, also of the Lib Dems said: “The loan charge has not stopped payroll loan scheme companies from operating.”

'Ensure promoters cannot profit'

His assertion speaks to an area in the new HMRC consultation which the department is asking for input on -- how to “ensure that promoters cannot profit from tax avoidance.”

In particular, by September 30th, it seeks views or evidence on “further options to tackle promoters of tax avoidance schemes and stop the supply of schemes at their source.”

The “drivers” of using a scheme are also sought, as are responses to whether “further” action should be taken to make sure taxpayers “understand the risks of entering schemes”.

'More onus on agencies, umbrellas or engagers'

But the same section of the 10-week consultation, notably where it hints at possible solutions to close schemes down, has cause to unsettle contractors, according to WTT Consulting.

Specifically, the government is considering “action to put more onus on actors in the supply chain, such as employment agencies, umbrella companies or engagers, to prevent people getting drawn into scheme use,” the  tax advisory observes.

“I would not be surprised, therefore, for them to push the burden back on to the supply chain, much like they have done with IR35,” said WTT’s head of tax investigations Tom Wallace.

“[But] this will cause further uncertainty and risk in the contractor market at a time IR35 reforms are also bedding in.”

'Revenue has neither the skills nor manpower'

By mulling supply chain parties as potential enforcers, and by it asking for help on a range of Loan Charge-related issues, the former tax inspector believes HMRC’s actions speak volumes.

“It seems clear at this point that HMRC has neither the skills nor the manpower to close DR schemes before sufficient numbers of people are affected,” said Wallace, who left the Revenue in 2017. “[This is] despite the range of new powers they have been given over the last few years.”

Taking to Twitter last week, the Loan Charge APPG indicated that the existing rules which the Revenue has in its arsenal still let promoters wriggle off the hook.

“Individual [taxpayers] are being targeted and bankrupted, even though employers are supposed to be liable. Meanwhile promoters face no action,” the MP-led group said.

'A number of other schemes'

But if only promoters were just disappearing to avoid charges, as one contractor says they go under HMRC’s radar simply to pop up elsewhere to pray on other workers all over again.

Naming names on social media, the contractor said the directors of a company known to contractors for brushing with HMRC in the past for overinflated take-home pay claims were now behind "a number of other" schemes, masquerading as ‘umbrella companies.’

To respond to the HMRC consultation, which comes after claims that NHS workers and other workers helping fight against covid-19 are now being targeted by scheme providers, email: tacklingdravoidance@hmrc.gov.uk

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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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