HMRC tax avoidance blacklist surges past 100 schemes for contractors to beware

HMRC is stepping up its blacklisting of avoidance schemes, ‘naming and shaming’ four in late August, and seven so far in September.

It also updated two existing entries on its blacklist -- Alphasaint on Sep 5th, and Solucinios Ltd on Sep 12th to say it breaches POTAS rules.

HMRC’s burst of activity (naming 11 new schemes in just 21 days), mirrors concern that the schemes are getting more prevalent.

'Increasing concern over umbrella supply chains'

The August and September updates mean there are more than 100 avoidance companies ‘named and shamed’ on the current HMRC list.

“We’re increasingly contacted by recruitment agencies expressing concerns about securing their umbrella supply chains,” SafeRec told ContractorUK.

“But ongoing ‘naming and shaming’ by HMRC sends a clear message; the days when such practices went unnoticed are firmly in the past.”

'Pazepay Ltd targeted healthcare workers'

The four schemes blacklisted in late August were Fast Payroll UK Ltd, Your Pay Ltd, Summit LED Ltd (t/a Adept Pay Ltd), and PazePay Ltd.

“We believe Pazepay Ltd targeted healthcare workers, including NHS staff, and council employees,” HMRC posted on Aug 29th.

Crawford Temple, CEO of compliance organisation Professional Passport, confirmed yesterday that HMRC’s intelligence is correct.

“The targeting of specific sectors, particularly health and social care, by Disguised Remuneration schemes is a well-documented concern.

“And [so] the use of [the word] “targeted” [here by HMRC] is [entirely] appropriate,” Mr Temple told ContractorUK.

'Get in touch'

HMRC said contractors using either scheme should “get in touch,” so it can help such workers “exit” the arrangements.

The taxman issued the same invite for contractors to get in touch as it blacklisted Fast Payroll, Sumit LED and Your Pay.

If only it were that simple, hints Clarity Umbrella managing director Lucy Smith.

'Ramifications and deterrent'

“HMRC is keen for contractors to come forward with details of any scheme if they realise they are caught up in something,” she began to ContractorUK.

“But at the moment, there are ramifications of unpaid taxes and penalties as a deterrent to do that ‘getting in touch’ with HMRC.”

Like others, Smith backs the blacklist (in principle) but at the same time says a “rethink” would be better than it growing exponentially.

'Stop dropping off those over 12-months-old'

“Two new entries [are welcome]; I just wish HMRC would stop dropping off those [entries which are] over 12-months-old,” says Alan Lowdell, formerly of Gattaca.

Colin Lothian, a senior chartered tax manager, prefers of HMRC and the blacklist: “We need greater penalties on promoters.

“And [we need] joint and several liability even down to director-level so that even if they fold these operations, they are held to account.”

'Misery'

On LinkedIn, a user of the site echoed that maybe the Insolvency Service should potentially step in.

“It is time these sort of avoidance schemes were shut down, the directors banned, and made to pay fully for the misery they ultimately inflict.”

Clarity Umbrella’s Smith is sympathetic.

“Why…at the point of inclusion on the list, it does not automatically trigger an update on Companies House [is beyond me],” she says.

“Either to help prevent further use of the scheme, or to flag up on the ‘people’ tab that the director has been blacklisted by HMRC.

“Just something from Companies House to reduce putting contractors and the whole supply chain at further risk would help.”

'Just the tip of the iceberg'

The seven schemes blacklisted (so far) in September are 1st Choice Umbrella Ltd, Adapt Ltd, AI Global Workforce Ltd, Everest Contracting Ltd, Innovate Ltd, Optima Ltd, and Odyssey Payroll Ltd.

“I can’t help but feel that this is just the tip of the iceberg,” Qdos CEO Seb Maley reflected yesterday, upon the list exceeding 100 entries.

“One less tax avoidance scheme is ultimately a good thing, but it certainly highlights the extent of the problem. Regulation is needed.”

'Encouraging'

Sebastian Sauca, a payroll compliance specialist, says it is “encouraging” that HMRC remains committed to holding avoidance companies “accountable.”

“HMRC’s efforts [with the list] undoubtedly contribute to this growing awareness within the industry,” Mr Sauca, CEO of SafeRec continued to ContractorUK.

“[And] it's encouraging to see that HMRC remains committed to holding these companies accountable.

“While these actions alone may not be enough to entirely eradicate the problem, I am an optimist, and they still represent significant progress compared to the past.”

'Umbrella brokers attempting to access confidential worker information'

However, sounding worried for the future is Professional Passport’s Mr Temple, because the unscrupulous are progressing too.

Mr Temple told ContractorUK: “We've observed a troubling trend involving umbrella brokers attempting to access confidential worker information through unsolicited approaches to recruitment agents.

“This raises significant data protection issues and potentially exposes workers to non-compliant umbrella schemes.

“Agencies must be vigilant against high-incentive offers from brokers or less reputable umbrella companies, as these may be attempts to bypass proper procedures.

“Some unscrupulous brokers are offering substantial incentives to recruitment consultants, including large referral fees and commissions. It's crucial for agencies to reinforce data protection and ethical practices among their staff.

“Recruiters should also be wary of unexplained movement and migration by workers suddenly to specific providers, as this could indicate targeting by Disguised Remuneration scheme architects.”