Tax avoidance schemes target workers answering NHS call-up
Former workers returning to the NHS are being targeted with aggressive tax avoidance schemes – under the guise of umbrella companies – which HMRC warns are unscrupulous and could leave people owing more tax.
About 20,000 former NHS staff have returned to work to help the fight against coronavirus, Boris Johnson said at the weekend. But tax avoidance scheme promoters have approached many, offering the false hope that they will be able to take home 80% to 85% of their pay.
HMRC said: “If you are returning to work for the NHS, HMRC is warning you to be very careful not to sign up to these schemes, which HMRC considers to be tax avoidance.”
Often in such cases an employment agency will recommend that the worker goes through an umbrella company, which in effect employs them. It pays the worker a minimum wage, then makes a second payment, which it claims is not taxable – such as a loan, a capital advance or credit facility.
“All of these schemes have one thing in common, and that is to attempt to disguise the true level of your earnings, which would ordinarily be subject to income tax and national insurance contributions,” said HMRC.
Anyone asked to sign documents putting them on to the payroll of an umbrella company should think very carefully before signing up. “These schemes are very likely to involve tax avoidance and you could end up owing tax and interest, as well as incurring the fees paid to the umbrella company,” said HMRC.
Umbrella companies have proved a thorn in the side of HMRC for years, with schemes frequently promoted in the IT and construction industry. Unions have also campaigned against them.
In 2014, the TUC general secretary, Frances O’Grady, called the practices of some umbrella companies “blatant tax dodging” and said they were engaged in “cynical attempts to evade pension responsibilities”. The trade union Unite also called on the NHS to outlaw umbrella companies operating throughout the service, calling them “parasites feasting off workers’ wages”.
Mainstream accountancy firms say they are surprised that the schemes are still so heavily promoted despite HMRC warnings. Fiona Fernie, a tax dispute resolution partner at Blick Rothenberg said: “Such schemes have been used for a number of years in other sectors, including the construction and IT industries, and HMRC have been advising that they do not work and constitute tax avoidance.
“It is astonishing that after such a prolonged attack on these arrangements by HMRC, returning NHS workers are now being targeted to use them by the scheme promoters. It is also of particular concern that the main targets are individuals who are unlikely to have experience which would warn them of the dangers of these schemes and who are going out of their way to be good citizens.”
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