Distinguish seven new avoidance schemes on HMRC’s blacklist from similarly named firms, contractors urged

Seven avoidance companies -- both familiar to dispute experts and familiar enough in name to pass themselves off to contractors as the genuine article, are on HMRC’s updated blacklist.

Minerva Services Ltd and Buckingham Wealth Ltd are two of the avoiders “well-known” in wealth management and tax dispute circles, says risk management adviser Karen Eckstein.

Collect Consulting Ltd; Connections Ltd, First Step Consulting Ltd, Simply Consulting Ltd and Total Recruitment Services, are the five which may win custom due to their names alone.

'Contractor eyes and ears might struggle to distinguish'

Like Minerva and Buckingham, which HMRC also blacklisted this month, advisers said the five should not be confused with similarly named companies unrelated to avoidance.

But they probably will be. “Some [concern] here [is] that the names are very close to legitimate operations,” WTT Group’s tax director Graham Webber warned of the five.

“And in the eyes and ears of many contractors, distinguishing them may not be so easy.”

'Little being done to stop contractors being targets'

Difficulty distinguishing -- blacklisted Total Recruitment Services is similar to bonafide jobs agency Total Recruitment Group for example, unsettles an already concerned Fred Dures.

“Yes, more tax avoidance schemes are being named and shamed,' but little is being done to stop them forming and targeting contractors,” Dures, a qualified solicitor told ContractorUK.

Online, and in wake of the seven being added to HMRC’s list of avoidance schemes, some threads suggested it was common knowledge that the new companies ought to be avoided.

'Contracting sector veterans will know these names'

But assuming that everybody simply knows already to steer clear isn’t a safe bet, says Julia Kermode, an occasional critic of the HMRC list because its entries only last 12 months.

“Those who’ve been in the contracting sector for years may well already know those named,” she acknowledged to ContractorUK. “But anyone new to this way of working almost certainly won't.” 

In the social care sector, recruitment industry payroll expert Amy Whitmarsh says the HMRC demands from individuals seemingly hoodwinked into schemes are coming thick and fast.

'£90,000 demand from HMRC'

“[We] have seen a significant increase in the number of calls from distressed and deeply anxious workers who have received excessive tax bills from using non-compliant providers.

“Yesterday,” continued Whitmarsh, a director at Big Fish Group Ltd, “we spoke to a guy who has received a [HMRC] bill for £90,000. And he has five colleagues in a similar position.”

Minerva and Buckingham specialise in “planning to get out of planning”-type arrangements, which should be a bigger red flag than both being incorporated in Belize, hints Tom Wallace.

'Nova Trust'

“HMRC [listing both] relates to the [schemes’] invitation to enter into an arrangement that asks previous users of schemes to make a 'replacement' contribution to a new settlement.

“[This settlement is] known as Nova Trust,” said Wallace, of WTT Group. “HMRC encourages users of previous arrangements not to enter into such 'replacement' arrangements.

“And I would wholeheartedly endorse that. It is very unlikely it resolves the historic planning.”

At law firm Thrive and Haddletons, where Eckstein is a solicitor, she reflected: “I feel sorry for those individuals who are encouraged to use 'planning' to get out of the holes they are in as a result of using these schemes. I have seen the devastating impact it has upon them”.

'Step in the right direction'

 But ‘impact’ is what troubles fellow solicitor Mr Dures, the founder of PayePass.

He believes another seven companies being identified in May by HMRC as avoidance companies to disengage from was “a step in the right direction,” but a tentative one.

“You have to ask if this list of tax avoidance is having big enough of an impact,” he told ContractorUK.

“Until real change is introduced – like umbrella industry regulation – the government is likely to be fighting a losing battle.”

'Farce'

A vocal supporter of umbrella companies getting regulated, Kermode said she agrees.

But the founder of IWORK also caveated that the list is a worthwhile resource, especially if contractors are now more at risk because they could be taken in by a name hoping to get confused with a legitimate business unrelated to tax.

This week appointed chief executive of PayePass, Kermode explained to ContractorUK: “Although I have gone on record as saying HMRC's list is a farce because it removes named companies after 12 months – therefore allowing them to continue unabashed – it does serve a purpose in alerting contractors to dubious schemes. 

“The problem is how to ensure that the people that need to see the list actually do see it, and that’s why it needs to be pushed out as far and wide as possible. 

“HMRC seems to be reliant on the contracting sector to do this for them, and although not ideal, if by talking about this it prevents just one person from becoming embroiled in a scheme, then it's worthwhile.”