Taxman’s avoidance list blackmarks Goldfish Umbrella, Signature Vintage, We Are Ava and Accent Umbrella Ltd

HMRC has used the first few weeks of May 2024 to add four new names to its latest “list of brollies that destroy lives”.

The four - which an adviser to contractors who declined to be named was referring to - were added in two stages; on May 9th and 16th.

On Thursday May 16th, HMRC added Goldfish Umbrella Ltd, Signature Vintage Ltd and We Are Ava Ltd.

On Thursday May 9th, it added Accent Umbrella Ltd.

'Advanced Payment'

With Goldfish Umbrella Ltd (GUL), users receive a single payment made up of two parts, with the second ‘Advance Payment’ totalling more take-home than had income tax and NICs been deducted.

With Signature Vintage Ltd (SVL), users receive a single weekly payment, but part of it is allegedly for an ‘Option Grant’ paid without deductions for tax and National Insurance.

With We Are Ava Ltd (formerly Hunter State Ltd), users receive two payments but one, without income tax and NICs deducted, is called an ‘Option’ or ‘Additional’ amount and is paid on the same day as the first payment which is subject to the correct tax deductions.

With Accent Umbrella Ltd (AUL), some employees receive their pay in two elements and HMRC says both elements should be treated as “normal income/as the user’s salary,” but only one element is.

'Key to tax compliance'

“Staying informed is key to tax compliance,” advised the Freelancer & Contractor Services, following Accent joining the HMRC list.

The addition of the four companies means the avoidance blacklist from HMRC “continues to grow,” observes Matt Fryer, managing director of Brookson.

But this month also saw the removal of two entries – because both had been ‘named and shamed’ by HMRC for 12 months.

'Withdraw'

Of the list, the tax department says if contractors are using “any of the schemes shown…or similar schemes,” they should pull out.

Specifically, “HMRC strongly advises you to withdraw from them and settle your tax affairs to prevent building up a large tax bill.”

An umbrella company vocal about the need for regulation to stop schemes, Clarity Umbrella, isn’t surprised that the HMRC list now identifies more than 70 separate companies accused of peddling avoidance.

“[With] umbrella regulation…not yet over the lines, it is unsurprising that this kind of ‘carry on’ is still happening,” the umbrella said.

'Don't think HMRC cannot change their mind'

And Clarity’s Lucy Smith had a warning for any scheme listed, despite some probably now thinking regulation won’t ever emerge.

“Don't think HMRC cannot change their mind in how they approach companies that are prepared to engage with these tax avoidance models,” Smith says.

“After all, [HMRC] decided to retrospectively tax for 20 odd years…those caught in the Loan Charge scandal, so don't think it can't be done.”

'Contrived payment models'

Last week Chris Bloor of Parasol, another brolly in favour of regulation, spoke of being “shocked” to learn of recruitment agencies still “facilitating contrived payment models”.

Taking to LinkedIn as well, Andy Hallett, managing director of Rectec posted on the issue:

“Like any industry there are good and bad operators,” he said.

“It’s often the companies that offer ‘too good to be true’ returns that spoil it for those that provide a great [and compliant] service”.

'Ban umbrella companies outright'

The LITRG says it last week updated its advice on issues for 2024-25 which it says umbrella contractors tend to ask about to try to stay safe.

But a legal adviser hints that neither guidance nor the ‘some good-some bad’ argument will safeguard workers from schemes like the 71 now blackmarked by HMRC.

“I’m starting a campaign to persuade the Labour party to ban umbrellas outright”, says the adviser, Martyn Valentine.

“Recruiters who mandate the use of umbrellas from a preferred supplier list cannot rely on opt-out notices, and will be at risk of litigation from contractors using the Umbrella Freeclaims service.”

'Barriers to entry'

Founder at The Law Place, Mr Valentine continued: “Using umbrella places contractors at risk of liability for underpayment of tax, and hirers at risk if the umbrella’s directors commit a tax evasion offence.”

As a solution, Valentine says the government could simply revert to the original wording for section 61O ITEPA and expand section 45 of the Criminal Finances Act 2017.

“A regulator combined with a professional body will embed the same essential barriers to entry as exist in regulated professions,” he said. “And clean up this industry’s image.”