HMRC anti-avoidance strategy put into question following 100 identified schemes
HMRC recently added four more tax avoidance schemes to its list of known promoters. While this should be positive news, it raises concerns about the effectiveness of HMRC’s anti-avoidance strategy. Qdos, a tax compliance expert, points out that despite identifying a growing number of schemes, thousands of contractors and freelancers remain at risk of non-compliance.
The explosion in identified tax avoidance schemes since 2022, with around 100 on the list, highlights a growing issue fueled by IR35 reforms and a lack of umbrella company regulation. Previous governments have attempted to recover lost tax revenues through controversial methods like the Loan Charge, but Qdos argues an urgent change in strategy is needed.
New additions:
- Everest Contracting Limited
- Innovate Limited (Registered in the Isle of Man)
- Odyssey Payroll Limited
- Optima Limited (Registered in the Isle of Man)
Update:
Key Points:
Regulation: Introduce regulation for the umbrella sector and hold scheme operators accountable.
Protection: Ensure better protection for flexible workers and other vulnerable self-employed individuals against exploitative practices.
Qdos CEO Seb Maley says, “The identification of four more avoidance schemes is good news, but the fact that around 100 have been identified highlights the extent of the problem.” He attributes the huge increase in tax non-compliance to the failure to regulate the sector and the impact of IR35 reforms.
The off-payroll rules have needlessly put some businesses off of engaging genuine contractors, for fear of getting their IR35 status wrong. As a result, demand for umbrella companies has skyrocketed – and shifty operators have flooded the marketplace to meet it.
Maley calls for a “serious change of strategy” and urges the new government to follow up on the previous administration’s consultation on umbrella sector regulation with concrete action. He says flexible workers have been exposed to these compliance risks for too long and a solution is long overdue.
Maley also draws attention to the Labour government’s campaign focus on ending exploitative work practices, stating, “that’s exactly what this is.” He adds that “some delayed justice for those affected by the Loan Charge scandal would also be welcome.”
The proliferation of tax avoidance schemes despite HMRC’s efforts underscores the need for a more robust and comprehensive anti-avoidance strategy. Key elements of this strategy should include regulation of the umbrella sector, increased protection for vulnerable workers, and holding scheme operators accountable.
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