HMRC Spotlight on rogue umbrellas ‘should still be glaring, two years on’

An HMRC Spotlight warning against dodgy ‘umbrellas’ offering inflated take-home pay could help save contractors today, even though it dates back to two years ago, say experts.

In fact, Spotlight 45 went live back in August 2018 but unlawful “schemes are still being sold and used” as of August 2020, says tax problem-solver and COP9 adviser Jeremy Johnson.

“For what it is worth,” he said this week, seeming to refer to taxpayers not heeding HMRC’s alert, “avoid them [schemes or companies offering ‘loans’] -- like the plague.”

'Half-truths, outright lies'

Posting his warning to LinkedIn, the adviser’s claim that the schemes are still very much active was supported by former HMRC inspectors, accountants, and consultants themselves.

“Providers of these loan arrangements tell half-truths and outright lies to their clients,” added Johnson, the director of inTAX Ltd, in an echo of what City of London Police have been told.

“Whether they, or you believe that somehow the arrangements will survive scrutiny, HMRC will make sure that the argument is long and difficult.

“And you'll probably end up paying me or one of my peers to help you unwind the whole mess.”

'IR35 reform has brought them to the forefront again'

Claire Martin, a senior tax manager at PwC explained: “IR35 changes…[scheduled for April 2021] have brought these [operators] to the forefront again.

“[It seems to be because] contractors [are] looking for ways to engage with their clients without becoming fixed-term or permanent employees of the client.”

Accountant Jenny Coffin came across as almost lost for words, seemingly due to the sheer damage being dealt to the contractor sector from HMRC’s inability to stamp on the schemes.

She asked: “How on earth, when we have contractors taking their own lives over the disaster that is the Loan Charge, can we still be in a position where these type of schemes continue to be promoted?”

'Nothing to see here...'

The BBK Accountants director wasn’t alone in trying to rationalise the arrangements still playing out.

“[I] would love to be at one of the marketing events for these things,” mused former HMRC inspector Dave Wase, a tax consultant.

“‘Nothing to see here; we’re only suggesting you are paid via non-recourse loans.’ Sadly,” he added, “the damage is usually well and truly done before we get a chance to intervene.”

'Understating it'

Trying to get the LinkedIn thread back on topic, tax dispute adviser Victor Cramer addressed Mr Johnson’s appeal to contractors and others, to ‘avoid the schemes like the plague.’

“I think you're probably understating it, if anything,” said Cramer, a settlement and ADR specialist. “The plague can be fairly easily cured nowadays. These schemes? Not so much.”