UK tax laws are not susceptible to easy manipulation as tax planning companies commonly advertise it. Anybody who promises you a 'non-taxable income’, be it in the form of a loan, investment, advance payment or credit - is laying a trap for you. There are no such schemes that can relieve anyone from tax responsibilities without breaking the law; without the infamous charge of 'tax avoidance’ and even worse ‘tax evasion’.
HMRC’s spotlight 54, issued in March 2020, garnered a lot of attention addressing the surge in tax avoidance promoters mainly targeting those NHS workers who are returning to work to battle Covid-19. While the issue was primarily topical, it also helped in revealing a much dangerous trend. There is a growing number of non-compliant umbrella companies operating in the UK. These companies, in one way or another, are actively responsible in promoting tax-evading measures - either by fake promises and luring people in or simply by deceit.
In this article, we cover:
It is of importance to take note of what these companies say to you. If you hear the word 'unprecedented' more than once, consider it a red flag, or at least, take it with a pinch of salt. Since the guidelines for tax calculation are well formulated by the government, there is hardly any place left for a third party to bring out unprecedented numbers.
Here are some common misrepresentations that you may encounter:
You may also be asked to sign more than one contract. It is seen as a sign of a tax avoidance scheme.
Sometimes, you have been offered to choose between a standard or enhanced scheme, in which enhanced scheme may be explained to you as more tax-efficient, which may also be seen one of the ways to avoid tax.
If the contract or agreement of employment does not state how your income payment will be made or breakdown of the deductions will be taken from your income, it could also be one of the signs of a tax avoidance scheme.
You may also be provided with a misleading offer of a cash bonus in case you recommend the scheme to any of your friends or relatives.
Apart from identifying the above mentioned common lies, readers are advised to scrutinise every offer that agencies make, at every step. Any arrangements indicating more payment than what is mentioned in the paperwork is a sign of an imminent fraud. Multiple, overly convoluted contracts, or the lack of it, must be looked at with suspicion. Readers are advised to take professional legal aids before agreeing to sign any contracts.
Also See: How To Choose An Umbrella Company?
Tax avoidance is not only a crime but also a social and ethical concern. The development and maintenance of the public sector are heavily dependent on the yearly tax collection. Emergency facilities such as healthcare, education, housing, and social care are possible only because a well-formed tax system is in place.
Coming to the legal repercussions of the offence, the offenders of tax avoidance are made to pay the entire amount they evaded, along with an imposed penalty.
Since the employer is legally responsible for cases of tax discrepancy, the onus is not on the employee. However, in many cases, non-compliant umbrella companies undergo liquidation easily, and the employees are left alone to face the brunt. Therefore it’s time to become more cautious against such schemes and agencies. It is vital to choose a trustworthy and reputed umbrella company.
No, not at all. As discussed above, many companies in the market are duping people in tax-related matters in various ways. But it is important to note that these companies that are choosing to break the law are only limited in number. There are several other credible options available.
You can look for compliant umbrella companies - the ones that follow UK tax laws and HMRC legislation. With the alerts mentioned above, it is not difficult to identify compliant from the non-compliant menacing ones. DNS Umbrella, for instance, can be a great option. DNS Umbrella is FCSA and Professional Passport accredited Umbrella company and relatively known for its integrity and credibility.
Tax avoidance is an offence, and an easier one to catch at that. Falling victim to fraudulent schemes and agencies can be unfortunate. But with little knowledge and care, this unfortunate situation is completely preventable. With the availability of the internet and other resources such as Tax aid and private financial consultants, one can easily calculate their tax amount correctly.
One need not rely on the lies and for the ones who have already fallen into the trap, there are enough forums for appropriate grievance redressal. HMRC provides various platforms for registering complaints, disclosures, and admissions for the ones who want to get out of their respective traps. Tax avoidance, in this sense, is avoidable. It is no longer an accident, as you can get out of it at any step.