HMRC and the Advertising Standards Authority (ASA) have launched a joint initiative to eliminate misleading marketing regularly used by promoters of tax avoidance schemes.
Marketed tax avoidance schemes
On Thursday 26th November 2020, HMRC published a report entitled: “Use of marketed tax avoidance schemes in the UK.” The report outlines what the government knows about the tax avoidance market, the promoters of these schemes, and the steps they are taking to crack down and tackle tax avoidance in the UK. One of HMRC’s efforts to crack down on the avoidance market are to join forces with the ASA to issue a joint Enforcement Notice and introduce stricter controls on what promoters can include in their advertising.
What is the joint enforcement notice?
The joint enforcement notice provides guidance to help individuals spot a tax avoidance scheme’s hallmarks and aims to protect people from being presented with misleading advertising, which may tempt them to use a tax avoidance scheme. The notice applies to websites that advertise a tax arrangement scheme to UK businesses or individuals that have been challenged by HMRC, and websites promoting similar schemes that are liable to HMRC investigation and intervention.
The enforcement notice highlights specific terminology that is consistently used by promoters of tax avoidance schemes and the assurances that the joint initiative will likely challenge:
- “100% HMRC compliant”
- “HMRC friendly”
- “Fully compliant with HMRC legislation”
The joint enforcement notice requires promoters to be clear about the potential consequences of using a tax avoidance scheme in any online advertisements, including the possibility of an HMRC investigation.
Jesse Norman MP, the Financial Secretary to the Treasury, said:
“The government has made clear its determination to clamp down on the promoters of tax avoidance schemes.
Today HMRC and the ASA are taking an important further step in this direction by action against misleading advertisements by promoters.
As always, we would encourage people to pay close attention to HMRC’s warnings not to enter tax avoidance schemes. If it looks too good to be true, it almost certainly is.”
What happens to promoters who fail to comply?
Immediate sanctions are in place for promoters who fail to comply with the guidance. The ASA and HMRC will use the enforcement notice to remove the promoters paid advertisement from search engines and a follow-up compliance action, including a referral to a Trading Standards officer.
Miles Lockwood, Director of Complaints and Investigations at ASA said:
“This notice serves as a clear warning to promoters of tax avoidance schemes – get your houses in order and ensure your ads comply with the law and our advertising rules or face enforcement action.
There can be a real consumer detriment for those who are unwittingly following bogus tax avoidance advice – you could find yourself facing a significant tax bill. Working with bodies such as HMRC is helping us to better protect consumers from misleading and unfair advertising that can leave them out of pocket.”
HMRC launches a new awareness campaign entitled: “Tax avoidance: don’t get caught out”
As part of the measures introduced to crack down on the tax avoidance market, HMRC has launched its “Tax avoidance: don’t get caught out” awareness campaign. The new campaign aims to educate contractors about spotting a tax avoidance scheme and highlights the consequences for anyone who is considering using one. The campaign urges individuals to:
Stop and take your time – Don’t sign anything you are not comfortable with and that you do not fully understand. Make sure you know exactly how it works and don’t be afraid to ask questions.
Challenge what you are being told – Always check for the warning signs of a tax avoidance scheme. If you are unsure, seek an independent, professional’s advice.
Protect yourself and others – If you think you are being offered a tax avoidance scheme, report it to HMRC immediately. If you think you may be using one and need help getting out, contact them, and they will provide further guidance.
The campaign also shares stories from contractors who have been caught up in tax avoidance schemes with the promise of lower tax bills, higher take home pay rates and less paperwork. The individuals affected have shared their stories as a warning to others as tax avoidance schemes have caused them nothing but stress, time and money. If it seems too good to be true, it probably is, and they strongly urge you to consider what you are signing up to and think twice about engaging with these schemes.
Jim Harra, Chief Executive and First Permanent Secretary of HMRC said:
“We’re doing our part to close down these schemes and make it difficult for promoters, but we need the public to play their part too.
You really don’t need to be a tax expert to spot an avoidance scheme – anything that sounds too good to be true almost certainly is, and anything which claims you can take home, say, 90% of your pay, or asks you to sign up to loans from an offshore trust just so you can be paid, is something to steer clear of.
That’s why we’re starting a big push to encourage taxpayers to steer clear of tax avoidance schemes. This is part of HMRC’s wider work to make it much harder for promoters to operate.”
It’s vital you only use compliant, FCSA accredited umbrella companies for your payroll
With the demand for umbrella companies increasing significantly in recent years, so has the number of tax avoidance schemes claiming they are legitimate umbrella companies. Unfortunately for contractors who have been misled by one of these schemes, it doesn’t matter whether they were using it knowing it was a tax avoidance scheme or not – HMRC will reclaim every penny as part of the 2019 Loan Charge.
The 2019 Loan Charge is a piece of legislation that HMRC introduced to reclaim underpaid tax from anyone who has used a tax avoidance scheme. The Loan Charge gives HMRC the power to reclaim underpaid tax to any unsettled loans or schemes as far back as the 9th December 2010.
This is why you must conduct thorough due diligence on any company you are considering using and look for the FCSA accreditation to ensure the provider you are considering using is operating ethically. The FCSA are a well-respected and recognised independent auditor committed to supply chain compliance within the self-employed sector. Using an FCSA accredited umbrella company will ensure that your pay is processed as per UK tax law and HMRC regulations and you do not have to worry about receiving an unexpected tax bill in later years.
Are you looking for an FCSA accredited umbrella company?
Churchill Knight Umbrella is proudly accredited by FCSA and is committed to providing our clients with a compliant umbrella service. If you are interested in finding out more about our umbrella service, please give us a call on 01707 871622 or request a callback and a member of our team will be in touch.
Founded by an IT Contractor in 1998, Churchill Knight has become one of the most respected contractor accountants in the UK. We’ve helped over 20,000 contractors with their accountancy requirements. As well as our accountancy services, we also have an industry-leading PAYE umbrella company and dedicated in-house personal tax department. Whichever service you choose, you can move forward with complete peace of mind. We are proud of the reputation we’ve built over the years, and our FCSA accreditation proves how committed we are to compliance within our sector. Keep reading…