One thing that employees of Umbrella Companies will not need to lose any sleep over is being pursued by HMRC for tax avoidance; however, flexible workers who are happy to fulfil their tax obligations through PAYE in exchange for peace of mind might spare a thought for those who dabbled in tax avoidance schemes well before the financial crisis hit, as the tax man is definitely coming after them.
Robert Morris, a partner with the City law firm RPC, says that there has been a surge in professional negligence claims against the providers of tax avoidance schemes dating back to 2005, many of which are now being challenged by the Revenue.
He explained: “HMRC is poring over many of the tax avoidance schemes that were set up before the financial crisis. It is taking a very aggressive approach towards individuals and is frightening many of them into paying the disputed tax without having to show that the tax is lawfully due. Rather than challenging HMRC and saying that the tax scheme worked, many individuals are deciding to pay up and then trying to recover their money with a negligence claim.”
Unfortunately for the individuals concerned, Mr Morris believes that many of their claims are unlikely to succeed either because they have been launched with the benefit of hindsight or because they are time-barred. Some have not yet been considered by the tax tribunals.
If individuals who took part in these schemes had been properly advised by their promoters of the risks involved at the time of joining, it will be “very difficult” for them to claim that they were badly advised, Mr Morris added.