HMRC names Focus Contractor Ltd as a tax avoidance scheme contractors should withdraw from
HMRC has put just a single new name on its avoidance ‘blacklist’ - Focus Contractor Ltd - belying what experts tell ContractorUK is quite a bit of action against its director and his companies.
Updating the avoidance blacklist on October 12th, HM Revenue & Customs said the Manchester-registered company “addition” had “now been named on [a HMRC] stop notice,” too.
The Revenue took to ContractorUK in July to say with 14 of them issued so far, stop notices are its way of telling promoters to cease promoting arrangements it suspects are avoidance schemes.
'Doesn't mean the scheme is any worse'
But just because a company is subject to both a stop notice and HMRC blacklisting (as Focus Contractor Ltd is), doesn’t make it ‘worse’ than blacklisting alone, clarifies PayePass.
Still, the PAYE audit firm hints the notices are being underused by HMRC and, as they carry a £1million penalty for non-compliance, it wants them issued earlier to protect contractors.
“Being under [a ‘STOP’] doesn't mean the scheme is any worse or better than any other scheme…but HMRC must be quicker to use them,” says the firm’s Julia Kermode.
“[Unfortunately, just as in this case with Focus Contractor Ltd], stop notices can be issued by HMRC even after trade has ceased.
“Key, though, is that a stop notice requires the recipient to immediately stop promoting arrangements of the kind described…and requires persons [named] to meet obligations.”
'A wake of companies, going into liquidation, owing money'
The persons behind the scheme, or person - singular - as far as Focus Contractor Ltd is concerned, is worth contractors remembering, according to a former tax officer.
“Note, one individual concerned with Focus Contractor Ltd was also connected to Saxonside Ltd,” says the ex-tax officer, Graham Webber.
Referring to Adam Keith Fathers, director of Focus Contractor Ltd (dissolved), also director of Saxonside Ltd (dissolved) - blacklisted in August, Mr Webber, now of WTT Consulting added:
“That individual seems to leave a wake of companies, going into liquidation, owing money.
“Although interestingly, HMRC is never shown as a significant creditor. I suspect that may be because HMRC is not quick enough to act, and prefers to chase individual users, rather than the ephemeral mist of the corporate existence of some of these entities.”
Trying to warn individual users, HMRC on Friday used social media platform X (formerly Twitter) to say “a promise of higher take-home pay” is a sign of an avoidance scheme.
In a 30-second video, the tax department also said that contractors or other individuals who need help exiting an avoidance scheme could contact HMRC.
“This can be daunting”, said Carolyn Walsh, another contractor tax adviser who’s ex-Revenue, almost reality-checking her old employer.
“[Far easier as a contractor] and if you suspect you have been led into tax avoidance by an umbrella company or other provider, [is to] find another payroll company/advice website…and check the amount of PAYE paid is correct against their online calculator.
“Then, file a tax return for the relevant tax year and report your total income plus allowable expenses. Your taxes will be calculated for the relevant year and when you pay any balance owing, you are in the clear.”
'Anyone can fall for clever marketing'
Taking to LinkedIn, Walsh endorsed the comments of tax commentator Dan Neidle, by reposting a post of his stating: “The problem is that anyone can fall for clever marketing.”
The post from Neidle, founder of Tax Policy Associates Ltd continued: “Fewer people are deliberate tax avoiders than HMRC imagines…[and] deterrents don’t work, education does.”
But at HMRC dispute advisory WTT, the fear is taxpayer-education could be being impeded by the taxman himself not providing all the details advisers say their clients need.
'Hidden from view'
WTT said: “In theory, once a stop notice is issued, the company should stop selling and promoting the designated scheme. And HMRC has powers to ensure this happens and is probably able to impose penalties if not.
“That action however is largely hidden from view - not helped by the fact that only three of the 12 stop notices actually [see HMRC] identify the promoter.”
The advisory was pointing to nine of the STOPs omitting any identifying details, meaning people can read all nine but not definitively know which companies HMRC has issued them to.
The three exceptions are; Peak PAYE Ltd, Focus Contractor Ltd which was first issued a STOP on Feb 13th 2023, and Saxonside Ltd, which was issued its STOP on Dec 13th, 2022.
Those dates for the latter two mean that as director of both companies, Mr Fathers would have received two HMRC stop notices from the tax authority in as many months.
And according to the avoidance blacklist, it is not just one but “two entries” Saxonside operates as schemes, and which HMRC says users should “withdraw from” -- SAX Option Grant and SAX Share Growth.
“[I feel like] a stop notice is potentially a good thing,” weighed up a contemplative Mr Webber of WTT.
“But in the absence of any transparency as to how effective they are in preventing those behind the schemes from simply moving on to another company, it’s perhaps too early to conclude [that they are indeed 'good'].”
More convinced STOPs are the way to go - but sounding like she wants Autumn Statement 2023 to turn the tables by putting HMRC under scrutiny, is Ms Kermode.
Not that she sounds sympathetic to the avoidance promoters or their schemes, either.
'A more efficient HMRC could act, so as not to expose contractors'
PayePass’s CEO, but also the founder of independent work champion iWORK, Kermode explained to ContractorUK: “If HMRC were more efficient with their stop notices then tax avoidance companies would cease to trade quicker and so not expose contractors.
“It is incredibly frustrating because HMRC has a very good understanding of tax avoidance activity which actively targets contractors; HMRC's own data acknowledges the contracting sector as a hotspot for it - yet they are far too passive in dealing with it. Despite the inherent lack of action, nobody in power is holding HMRC to account”.
Even less impressed at the Revenue is a contractor who saw its Friday tweet about spotting the signs of avoidance schemes.
“HMRC and [its CEO] Jim Harra just [like to] put promoters on their ‘naughty step’ for 12 months,” the contractor said of the avoidance blacklist, elsewhere mocked as HMRC’s ‘naughty list’ or more seriosuly characterised as a ‘wall of shame.’ “[But at the same time, HMRC and Harra are both financially] destroying promoters’ victims, [while] allowing the promoters themselves to run away.”