MPs and industry leaders slam tax avoidance scheme promoters who are targeting NHS heroes

The co-chairman of an influential group of MPs and the CEO of a major industry group are calling for action to thwart umbrella companies which are exploiting frontline NHS staff by luring them into tax avoidance schemes.

Julia Kermode, chief executive, Freelancer & Contractor Services Association

HMRC said it has become aware that unscrupulous promoters of tax avoidance schemes are targeting workers returning to the NHS to help respond to the coronavirus outbreak.

The schemes have a number of common features, according to HMRC. The first payment is usually declared as earnings and will go through the umbrella company payroll, often at around National Minimum Wage levels or a flat-rate payment.

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The umbrella company will claim that the second payment is not taxable. This payment may be described as a loan, annuity, shares, a capital advance involving mutual, joint or co-ownership, or a payment derived from a revolving line of credit facility, or some other non-taxable form.

HMRC is warning people not to sign up to these schemes, because they are considered to be tax avoidance.

Ruth Cadbury MP, co-chair of the Loan Charge All Party Parliamentary Group (APPG), said: “It’s appalling that even now brave frontline workers in our NHS are being mis-sold schemes by some unscrupulous umbrella companies, which HMRC must tackle as a matter of priority.

“The fact that people, including key workers, are still being lured into schemes, shows how badly the loan charge has failed in stopping promotion of schemes as well as being unfair and retrospective.

“NHS workers are serving us in our hour of need and putting themselves at risk in doing so, yet they could pay the price down the line when HMRC catches up with them and the promoters who’ve mis-sold them these schemes have disappeared. The Government must listen and act,”

Julia Kermode, the chief executive of the Freelancer & Contractor Services Association, which tests umbrella firms to ensure they behave ethically and remain compliant, said: “We have long been concerned about the dodgy disguised remuneration schemes, and in particular we are very disheartened about the number of these aggressively targeting health workers currently – whom we as a nation are dependent on right now. We want HMRC to stamp out all of these unethical providers.”

Ms Kermode added: “They know that some are specifically targeting the health sector right now as they issued a ‘spotlight’ on it. This is positive but the schemes are still out there and exploiting workers.

“HMRC will say that they are investigating them – and they probably are – and that it takes time to gather the evidence and make a case, which is also true. But we don’t see any of this, and we feel that they could do more to communicate what actions they are taking.”

A Government spokesperson said: “We take this issue very seriously and do not accept the accusations made.

“HMRC has recently published its strategy to tackle promoters of tax avoidance and this month, published Spotlight 54 warning returning NHS workers about unscrupulous avoidance promoters who are trying to lure them into arrangements, which HMRC suspects are tax avoidance schemes.

"Due to taxpayer confidentiality we cannot comment on all investigative action taken on this issue.

“Our advice has always been to steer well clear of these schemes, and to report them to us in confidence for investigation”.

"When HMRC published the Spotlight recently, we spoke to a great number of national and regional journalists and got a range of coverage across the country with our warning. We also posted across all of our social media channels and will continue to do so if necessary.

"We further included messages in our MP and stakeholder digests and are used other networks within HMRC and at the Department of Health and Social Care and NHS England to spread our warnings."

"The most recent Spotlight was the 54th in the series dating back to 2010 – so we have been warning people," the spokesman added,

"Through a series of legislative changes and HMRC successes in the courts, the avoidance market has shrunk significantly since 2010. Further to this, during 2019-20, HMRC doubled the resources focussed on tackling scheme promoters.

"HMRC does not comment on ongoing investigations and enquiries. This has always been our position.

"We welcome the efforts of stakeholders to share our messages and appeal to them to share the warnings as widely as they can."

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