New evidence has come to light that HMRC is clamping down on tax avoidance arrangements with renewed vigour, using Managed Service Company legislation to more than treble its investigations in the space of just six months.
Recruitment law firm Lawspeed has obtained the news in response to Freedom of Information requests. The Revenue’s enquiries into potential MSC tax avoidance arrangements leapt by 644 between April and November last year, taking the total from 216 to 860 after several years of apparently lying fallow.
Recruiters and freelancers using well-regulated PAYE Umbrella Companies or legitimate limited companies have nothing to fear from the development, but other arrangements could now attract official scrutiny from the tax authorities. For recruiters using companies that have deliberately sought to avoid tax and NIC, there is a nasty sting in the tail: they will be liable for all of the outstanding debts to the Revenue.
Adrian Marlowe, Lawspeed’s director, said that it is “not necessary for HMRC to have to prove its case beyond doubt for a debt to be transferred. Once a notice has been issued it is for the agency and/or its directors to show that the transfer is inappropriate, which can be difficult if the agency has referred the worker to the provider concerned.”
Since MSC legislation was first introduced in 2007, HMRC has shown little interest in applying it; however, in an age of austerity where every penny of revenue suddenly matters, priorities appear to have changed.
Recruiters supplying staff employed by reputable Umbrella Services can breathe a sigh of relief: all tax and NICs are paid automatically on a PAYE basis and HMRC will not be knocking on their doors.