HMRC has published a hit list of tax avoidance schemes targeted under its controversial new accelerated payments programme, which requires those suspected of avoiding tax to pay any disputed sums upfront before the outcome of a tribunal.
The vast majority of Umbrella Company Employees are unlikely to be affected, as tax and NICs are automatically deducted from their income from their contracting activity on a PAYE basis; however, the international law firm Pinsent Masons has warned that self-employed contractors who have signed up to these schemes could face serious hardship or even insolvency.
Promoters of tax planning schemes are required under DOTAS (disclosure of tax avoidance schemes) rules to notify the Revenue of their product, which is then given a scheme reference number (SRN) if HMRC considers it dubious or illicit. Users can then be subject to accelerated payment requirements.
Jason Collins, a partner at Pinsent Masons, said that the measures will inevitably cause financial stress and insolvency amongst individuals subject to accelerated payment demands. He continued: “It is not just high net worths and celebrities that have invested in these tax planning schemes. There are a lot of modestly well-off self-employed contractors who have been sold tax planning schemes that will face these demands for money.”
Mr Collins criticised the Revenue for changing the law retrospectively.
The safest option would appear to be to pay due tax and NICs automatically through a competent Umbrella Company.
The SRNs of targeted schemes can be found on the government’s website at https://www.gov.uk/government/publications/tax-avoidance-schemes-on-which-accelerated-payments-may-be-charged-by-hmrc