HMRC currently have an ongoing campaign for Tax avoidance – Don’t Get Caught Out. This is to help taxpayers stay away from tax avoidance schemes and highlight specific scams and details or promotors, enablers, and suppliers of these schemes.
Tax avoidance is, as HMRC describe, ‘bending the rules to try to gain a tax advantage that was never intended.’ This often includes an individual creating transactions with no purpose, other than to reduce the amount of tax that is payable.
The first part of the campaign is understanding what tax avoidance looks like. It can be easy for taxpayers to fall for tax avoidance schemes as some schemes can look genuine. HMRC suggest answering three questions before signing up for a scheme.
Are the proposed contract pay arrangements incredibly complicated?
Have you been told that you’ll take home more money after tax than you would have expected?
Will you get a cash bonus if you recommend a friend?
If the answer is yes to most of those questions, then the scheme is worthy of investigation and any taxpayers should be alert of the scheme. HMRC also has a guide published on the Gov.uk website which can help taxpayers sport the signs of tax avoidance.
When signing up for a scheme, taxpayers should take their time to understand the scheme they are signing up for and if they are comfortable doing so. If a taxpayer is being pushed into signing a contract or agreement, this means that the provider for the scheme is reluctant to offer any answers and does not want to be questioned.
Taxpayers need to remember that if you were to sign up for a tax avoidance scheme, you are responsible for paying back the tax that is owed and paying any penalties and interest if they avoid it. If you are not comfortable with any schemes you are looking at, then it is best to seek independent professional advice.
Examples of agreements from tax avoidance schemes:
If you keep more income than they would have thought.
You must pay National Insurance contributions and tax, if the total of these contributions is less than 33%, you may be part of a tax avoidance scheme.
If some or all payments are said to be non-taxable.
If only part of the total payment is taxable, this amount will appear to be around the National minimum wage, however, the total payment is higher.
They offer an enhanced scheme
If you are asked to sign more than one contract or agreement
If the contract of agreement does not state how income will be paid or provide a breakdown.
You will gain a bonus for recommending the scheme to others.
Don’t always accept schemes, that state they are ‘accepted by HMRC.’ HMRC does not approve schemes.
If you suspect a scheme is a tax avoidance scheme, then you can report the scheme or report the person/business offering the scheme. You can do this by using the Report Tax Fraud Online form and using the code ‘COCA’ in the ‘other information’ section. You can also phone HMRC on 0800 788 887.
If you think you are involved tax avoidance scheme, then you need to seek help immediately, either from a professional advisor or from HMRC.