‘Avoidance bosses’ ready to identify themselves undermine HMRC’s ‘name and shame’ director power

A new power for HMRC to personally ‘name and shame’ the directors of tax schemes that target contractors is hardly making such “avoidance bosses” quake in their boots.

In fact, two directors whose schemes were featured on HMRC’s avoidance ‘blacklist’ before the naming power applied, and so who remain anonymous, say they don’t mind being named.

Both directors were told they could appear in a forthcoming article for ContractorUK -- on an anonymous basis, exploring the naming power, found at Section 86 of Finance Act 2022.

'Doesn't change things much'

But independently of each other and without knowing the other’s response to the same offer of anonymity to feature in the article, both directors chose not to have their names withheld.

Asked about the naming power, a tax researcher says he isn’t actually surprised individuals blackmarked by HMRC as “avoidance bosses” don’t seem against coming forward.   

“My view is that being named individually doesn’t change things much, [if their company has already been named on HMRC’s avoidance scheme, promoter, enabler and supplier list].”

The researcher explained: “The companies featured on that list tend to be relatively small. So anyone can find out who the directors are, either from their websites or Companies House.”

'Long overdue for HMRC to name individual directors'

Nonetheless it is “long overdue” that the people running, and profiting from avoidance schemes have their names circulated as widely as possible, says a chartered accountant.

“It has been far too easy for individuals to hide behind a company name”, says the accountant, Helen Christopher, chief operations officer at Orange Genie Accountancy.

Ms Christopher also told ContractorUK:“[HMRC naming them personally makes it trickier to] re-invent themselves as new companies. Also, the supply chain should know who personally is behind these schemes.”

'May cause concern'

Announcing its new power, HMRC said: “Naming the directors behind these schemes will alert the public to steer clear of any avoidance schemes promoted by other companies with the same directors.”

Meredith McCammond, of the Low Incomes Tax Reform Group observes that under Section 86, an authorised HMRC officer can merely “suspect” an arrangement of being in scope.

While she says that “may cause concern” to some, HMRC must give any person it names 30 days to make representations about whether their information should be published.

So “safeguards [are] bult in” to the Revenue’s new power to name tax avoidance promoter directors, Ms McCammond, the LITRG’s technical officer concluded to ContractorUK.

'Concerns aroud due process'

Yet investigate thinktank TaxWatch UK argues that HMRC’s name and shame power (at least as far as companies are concerned), “raises concerns around due process.”

According to Section 86 of the Finance Act 2022, HMRC must amend or withdraw information which is incorrect or misleading “in a significant respect”.

LITRG says a “formal retraction” as well would be better, and in the inevitable cases of “avoidance bosses” who later turn out not to be avoidance bosses, a written “apology”.

'HMRC educational letters will worry innocent contractor umbrella companies'

But it is the Revenue being permitted to name names in its letters to umbrella company contractors which concerns the group’s Ms McCammond, more so than the ‘naming and shaming’ director power which has so far been used to identify just three individuals.

“The bigger issue is the ‘educational’ letters that HMRC sends to workers who they suspect are in Disguised Remuneration,” she said in a statement last week.

“What if HMRC hits a wrong target with their research, and send letters to the workers of an innocent umbrella company, telling them their employer is using DR? This will cause reputational damage and maybe a loss to the business if workers leave them. The fact there is limited scope for redress for such ‘wronged’ umbrellas -- as far as I can see – is worrying.”