Police called to investigate disguised remuneration scheme promoters

The taxman’s call to relook at disguised remuneration seems to have produced an unexpected response – a formal letter to City of London police asking for criminal action against promoters.

Addressed to the force’s Economic Crime Unit, the letter by George Turner, a director of Tax Watch UK, asks for a criminal investigation into the promotion of DR schemes which, he says, “constitute fraud.”

“Some users of failed tax avoidance schemes have since started civil actions against scheme promoters,” the boss of the tax charity begins.

“However, as far as I am aware, no criminal action has ever been started by law enforcement authorities for the fraudulent sale of these schemes.

“The continuing sale and marketing of disguised remuneration tax avoidance schemes constitutes a serious economic crime costing the Treasury hundreds of millions a year.”

'Crystal clear'

Seeming to refer both to Loan Charge 2019 and numerous ministerial statements, Turner says in his letter that the legal position on the taxation of the schemes is now “crystal clear.”

As a result, “anyone continuing to design, market, and promote loan schemes can not be doing so in the honest belief that these are anything other than unlawful attempts to evade tax.”

He adds: “Our own research has confirmed that tax professionals continue to market these schemes – and continue to market them as being fully compliant with tax law.

“Those marketing these schemes are dishonestly making false representations, in that they are aware that it is misleading to state these schemes are compliant with the law.”

'See through the sales front'

In line with the charity’s research, a BBC investigation has found that NHS returnees trying to assist with covid-19 are being targeted with schemes offering unlawful take-home pay.

“I’d urge all recruiters to share [any similar] experience,” said Matt Fryer of Brookson Legal, in an online post to the taxman’s call for ideas on tackling DR.

Addressing recruitment agencies, Mr Fryer added: “I suspect you’ve all been approached by these providers and hopefully you’ve seen through their sales front and not engaged.

“Your sector can make a positive change and help HMRC to focus their efforts to eradicate these providers from the market.”

'Financial ruin for scheme users'

In his letter to City of London police, Turner confirms that promoters “continue to perpetrate” schemes, partly as they can generate “very significant fee income” from users.

“[But] if HMRC challenge these schemes,” he writes, “the users, and not the promoters, will be held liable for the taxes owed. This can result in total financial ruin for scheme users.

“It is my view that these schemes constitute fraud, not only in the loss to the public purse, but also on the scheme users who may be fraudulently persuaded to join such schemes, handing over a substantial proportion of their income to promoters, on the mistaken understanding that these schemes are lawful.”

'Contractors in serious danger'

At WTT Consulting, which specialises in tax disputes, it is the scheme users who it regards as the most vulnerable, despite their best efforts with the Revenue to extricate themselves.

“We still await a number of settlement calculations from HMRC despite being a little over a month from HMRC’s ultimate deadline,” says WTT’s head of investigations Tom Wallace.

In a statement to ContractorUK, Mr Wallace added: “Contractors are in serious danger of being penalised with the loan charge through no fault of their own, if HMRC do not urgently review what appears to be a hard deadline for them of September 30th.”