Contractors’ Questions: Is an HMRC list some 15 years too late a remedy to Disguised Remuneration?

Contractor’s Question: The addition of AML Tax UK Ltd by HMRC to its avoidance blacklist strikes me and other contractors I know as too little, 15 years too late. Is this list which shows schemes still in operation really the way forward to stop more ruined livelihoods?

Expert’s Answer: Like you, the recent inclusions by HMRC to its list of named avoidance schemes, promoters, enablers and suppliers doesn’t surprise me.

As to solutions, our recommendation is that alternative strategies should be explored by HMRC, beyond the tax authority narrowly focussing on the promoters and trying to change taxpayer behaviour.

New targets

For example, there are other entities in the supply chain which have a role and some responsibility and so could be targeted. Targeting such entities would be potentially quicker, easier for HMRC, and more effective at clamping down on the ongoing problem of Disguised Remuneration.

Similarly, HMRC could take action at employer level -- notably the batch of umbrella companies which I spoke of this week to ContractorUK -- because as the employing entity, these umbrellas have a responsibility for operating PAYE correctly.

Debt transfer powers ought to be used

In our view, and as required by the PAYE regulations, HMRC should pursue these umbrella employers in the first instance for any DR underpayment, potentially using their ‘debt transfer’ powers if necessary to get behind the umbrellas’ limited liability.

HMRC currently failing to take action against such umbrella companies (seemingly in breach of HMRC’s own regulations), means that there is no real incentive for the employers – the rogue umbrellas -- to stop using these schemes to pay people and, unfortunately, the cycle continues.

Further reading

As to what else can be done, this transcript from a BBC programme is well worth a read, as is this story, in helping make contractors and others aware of some of the tactics in use by promoters today.

The expert was Meredith McCammond, technical tax officer at the Low Incomes Tax Reform Group.