HMRC blacklists B2B Tradecard, New Mill Resourcing, Umbrella Zone, and three other avoidance schemes

Three tax avoidance schemes got blacklisted by HMRC in June and three in July too, indicating “many contractors are still being duped”.

In fact, early last month, HMRC ‘named and shamed’ Cube Umbrella Ltd, Mountain View Admin Ltd and 365 Umbrella Ltd.

The second trio - joining the avoidance blacklist on July 14 - were B2B Tradecard Ltd, New Mill Resourcing Ltd and Umbrella Zone Ltd.

'Withdraw'

Experts have previously said that while welcome in principle, the HMRC resource suffers from a lack of visibility.

But a manager at Colt Technology Services, Ed Paul, is using LinkedIn to post the names of the schemes every time HMRC updates the list.  

A ContractorUK forum thread is also keeping an up-to-date log of companies entered onto the HMRC list (- helpful given that entrants are deleted after 12 months).

But not everyone is surprised to see the schemes which the taxman this month said contractors should “withdraw from…to prevent building up a large tax bill.”

'Counter-arguments'

Tom Wallace of WTT Group says he predicted what HMRC’s “counter-arguments” to B2B Tradecard would be (outlined in the July 14th update), as far back as June 2023.

As to the arrangements that B2B - company number 09436126 - made available to contractors, HMRC has described them in detail.

In short, users as limited companies purchased corporation tax-deductible “advertising” from B2B, only for B2B to then credit 80% of the purchase price onto a pre-paid debit card.

On top of them avoiding corporation tax, the user then has a debit card free of PAYE and NICs, and racks up “loyalty points” whereby every point generates them £1.

'Not allowable deductions for corporation tax purposes'

HMRC says the redeemed loyalty points are disguised remuneration and so “should be subject to deductions for income tax and NICs.”

The Revenue also says in the July 14 update that the advertising amounts paid by the companies to B2B are “not allowable deductions for corporation tax purposes.”

Graham Webber of WTT Group, who writes today about Disguised Remuneration - exclusively for ContractorUK, says: “Hiding under a different label does not mean that the core transaction changes its tax treatment. 

“This particular device -- a pre-loaded debit card -- has been seen many times.

“Most recently…by those [contractors] who used [a scheme called] Procorre. There, a pre-loaded card for ‘business expenses’ was part of the scheme. 

“[However you choose to label it] it's income. It's taxable, and arguing otherwise is going to rack up some professional fees -- and [as a scheme user] you'll still have to pay the tax.”

'Improper'

Tax Policy Associates, a think-tank, confirms “there are other businesses like B2B Tradecard” operating, but it cautions, “all are in our view improper.”

“We expect this follows a year of enquiries from HMRC,” the think-tank added of the July 14 ‘naming and shaming’ of B2B Tradecard, which IT contractors might have encountered presenting itself as a fintech company.

Tax Policy Associates continued in a social media post: “[We also expect it follows] a decision to use HMRC's tax avoidance scheme powers against the company [B2B Tradecard] -- and failed attempts by the company to review that decision.”

'Dubious providers'

A compliance organisation says datasets capable of identifying “dubious providers” in the contractor marketplace appear to be “underutilised” by HMRC.

The organisation, Professional Passport adds: “HMRC already has the tools necessary to combat systemic tax avoidance, including Real-Time Information and Intermediary Reporting.

“[But] HMRC [needs to collaborate] more closely with recognised compliance bodies to identify scheme architects, and limit their market access.

“We need a multi-faceted approach that equips HMRC with more resources, enhances enforcement, and implements stringent penalties for offenders.”

'Disappointing'

Professional Passport’s CEO Crawford Temple says King’s Speech 2024 being silent on avoidance schemes was “disappointing”

Mr Temple says “no specific reference” in the speech to targeting arrangements is at odds with Labour’s pledges about avoidance “on the campaign trail.”

Clarity Umbrella is similarly disappointed that it is only the HMRC list which is visibly addressing abusive arrangements, despite being two weeks into a new government which vowed action.

'Bearing down'

“A harder crackdown on tax avoidance schemes would be welcome,” Lucy Smith, Clarity’s managing director said last night to ContractorUK.

“The new Labour government says it plans to ‘make work pay’ yet curiously, it has made no reference to making this happen by bearing down on avoidance.”