HMRC blacklists 16 tax avoidance schemes in just four weeks

HMRC ‘named and shamed’ eight tax avoidance schemes in September’s second half, further to eight more so far in October.

The latest eight are; LWI Services, Agile Pay, Employe US, Just Standard, GL Premium, Umbrella Union, Signature Pay and “Miwsa Management Ltd.”

Similarly-worded “Miwsa Ltd” was among the eight blacklisted in September.

But, unlike Miwsa Management, Miwsa Ltd’s “Person with Significant Control” hasn’t had their correspondence address unceremoniously defaulted to Companies House’s.

‘Inappropriate’

The UK companies registrar defaults a provided address to its own when it is “inappropriate”, such as when the address is being used without permission.

So a company’s registered address being changed by Companies House to its own address (PO Box 4385 [company number] Cardiff CF14 8LH) is a potential red flag for contractors to beware.

The other schemes blacklisted in September’s second half by HMRC were Infrapo Consulting; Burnsall Pay, Connection Point, Langan Scott & Co, United Pension Administration and Property 118 Ltd.

‘Capital Account Restructure’  

Property 118 may be the first entry on HMRC’s list of named tax avoidance schemes to join with two arrangements deemed to be abusive, rather than just one.  

Each published under DOTAS, HMRC blacklisted Property 118’s “Substantial Incorporation Structure” scheme and its “Capital Account Restructure” scheme.

But one name being behind two schemes, or even two similar names (Miwsa Ltd – Miwsa Management) isn’t why the figure ‘2’ is being bandied about online.

And with some concern for contractors.

‘HMRC will go to the individual workers’

“The reserves of the company named [by HMRC on October 10th], Signature Pay Ltd, are less than £2k,” observed WTT’s Graham Webber, pointing to SPL’s annual accounts.

“HMRC is [therefore] unlikely to be able to recoup any PAYE they think has been avoided from the nominal employer.

“Sadly, I think this means that HMRC will go to the individual workers, some of whom may be unaware of the avoidance, for payment.”

WTT’s co-founder, Mr Webber said even “more sadly,” SPL users who accept HMRC’s invitation to get in touch to arrange an “exit” may be “volunteering” themselves for an enquiry and tax bill.

‘Get in touch for help to exit’

HMRC issued the same invitation blacklisting Umbrella Union on October 10th -- the very day it blacklisted Signature Pay Ltd (SPL).

“We’ve [today] named Umbrella Union Ltd as a promoter of tax avoidance.

“Users are paid an amount close to National Minimum Wage through PAYE, then a second amount with no tax deductions.

“If you’re using this scheme, get in touch for help to exit,” HMRC said.

‘Make it easier to apply the penalties’

A data privacy engineer, David Gilmour, created his own version of HMRC’s invitation.

“‘Get in touch for help to exit’ -- and make it easier for us to apply the penalties [to you],” Gilmour wrote.

Lucy Smith of Clarity Umbrella said in September that the “ramifications” for contractors who contact HMRC as scheme users were always omitted from its invite.

‘Removed after 12 months’

Also commenting at the time when the HMRC schemes blacklist passed the 100-mark was former finance director Alan Lowdell.

Lowdell said then -- as he did to HMRC blacklisting Infrapo Consulting and Connection Point on October 26th:

“Here we go again, more new additions. But don’t forget they get removed after 12 months.”

‘No fixed publishing time limits’

In reply last week, HMRC said not all tax avoidance schemes, promoters, or suppliers are being de-listed after 12 months.

A spokesperson for HMRC told ContractorUK: “While some schemes had to be removed from the list after 12 months because they were named under the Finance Act 2021, if the scheme was still live after 12 months, we could republish them using the 2022 legislation.

“Now we can use powers under the Finance Act 2022, which have no fixed publishing time limits.”

The position outlined by the HMRC spokesperson has been spelt out on ContractorUK previously, here.

‘Directors can be liable for failing to disclose a tax avoidance scheme’

However, HMRC also took issue with a separate claim -- that's ‘what’s needed’ to tackle tax avoidance promoters is “joint and several liability down to director-level, so that even if they fold [their] operations, they are held to account.”

The claim was reported by ContractorUK after it was made by a chartered tax adviser.

The HMRC spokesperson says: “Directors and other connected individuals can [already] be made liable for a company's penalties from failing to disclose a tax avoidance scheme, if the company goes insolvent or there’s a serious possibility of it becoming insolvent.”

‘Received a tax avoidance penalty where the company is insolvent, or soon to be’

ContractorUK reported on the powers for HMRC to target directors of companies involved in promoting tax avoidance here, after an expert outlined their first mention here. 

Official guidance is also available here.

The official guidance specifies when HMRC can issue joint and several liability notices to individuals connected to a company that has “received a tax avoidance or tax evasion penalty” and the company has “started, or is likely to start, insolvency.”

‘Walked away’

Such joint and several liability notices may reassure one LinkedIn user who said of an Isle of Man-registered company which was blacklisted by HMRC for avoidance but was already under a strike-off:

“For all I know, they [the directors] have simply walked away from these corporate envelopes and set up new ones.”

WTT’s Mr Webber sounds hopeful that the notices potentially doing their job (insofar as they might catch up with the directors), won’t go to the taxman’s head.

‘Non-compliance more common than HMRC believes’

He says: “HMRC [tend to] say that their compliance activity in this space is already adequate.

“[Well, our organisation] conducts PAYE audits of companies in the contractor space, and I can assure HMRC that non-compliance is a lot more common than they think.”

A communications engineering expert therefore recommends HMRC tries a tough-talking approach; at least tougher-talking than today’s.

Reacting to HMRC asserting in a tweet “We have named more promoters of tax avoidance,” the comms engineer quipped:

“Wow! You sure know how to strike fear into promotors of legal tax planning.”

‘Dodgy schemes to save tax’

Accountant Tanvir Alam says his efforts aren’t always succeeding either.

“Some clients are more likely [than others] to try to take advantage of these dodgy schemes to save tax,” Alam wrote, in a thread on the latest ‘named and shamed’ schemes.

“A few of my clients went against our advice in the past, and later on had to pay hefty fines and interest -- as well as the original tax that they were advised to ‘dodge.’”

‘Foolhardy’

A former tax inspector fears that advisers at the other end of the spectrum may be being listened to instead.

“If anyone is still foolhardy enough to believe that loopholes exist and that a professional-looking adviser spouting non-professional tax advice is a ‘good bloke,’ then they need to rethink their view of the world,” says the former inspector, Carolyn Walsh.

Walsh added in a statement to ContractorUK: “Tax avoidance is down from approximately £4.7 billion about 20 years ago to around half a billion today. So there are still more than a few individuals who are in need of a little introspection. And there are 5,000 newly recruited HMRC officials who will soon be ready and willing to assist in that introspection.”