Offshore intermediaries tax avoidance

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Avoid referring your candidates to offshore intermediaries

Last updated on Tuesday, April 11, 2017

Written by Andrew Trodden

It is understandable that your candidates will want to maximise their take home pay. However, using an offshore intermediary could land them in serious trouble with HMRC and your recruitment agency could also be punished as a promoter of a tax avoidance scheme. Find out more about the risks of referring your candidates to offshore intermediaries.

New rules came into effect on the 1st January 2017 that were designed to target individuals and organisations promoting tax evasion.

Those found guilty of encouraging others to take advantage of tax evading offshore schemes will be fined 100% of the tax owed, or £3000 (whichever is highest).

There has recently been a government consultation to discuss tax evasion by individuals and organisations. Over the coming months, HMRC will be revealing new guidelines to clamp down on tax evasion and are expected to issue fresh and stricter penalties for those who fail to comply with UK legislation.

The official Consultation Document states that HMRC plans to introduce rules "to require businesses who create certain complex offshore arrangements to notify HM Revenue and Customs (HMRC) of the details of such arrangements, and provide HMRC with a list of clients using them."

Tax evasion is illegal and punishable by heavy fines and even custodial sentences in the most serious cases. Tax avoidance is not illegal, although when it comes to offshore intermediaries, HMRC will not hesitate to backdate tax legislation and apply this to the time of tax avoidance. Consequently, if you have used or promoted a tax avoidance scheme since 1987, you can retrospectively be fined and asked to repay the tax owed, as well as potentially being fined.

Since April 2015, your recruitment agency has been required to send quarterly HMRC reports that contain the details of all your candidates and their payments where PAYE was not operated.

If you only introduce your candidates to their clients and have no further involvement in the supply chain, you do not need to provide this information.

There are copious offshore intermediaries offering significantly higher take home pay for contractors compared to compliant payroll providers in the UK. It is fair to assume that if an opportunity sounds too good to be true, it probably is and the scheme involved will be encouraging tax evasion. In order for your candidates to be law abiding and for your agency to maintain its compliance and reputation, it is imperatively important you refer your candidates to a fully compliant payroll provider.

Innovative tax avoidance schemes are frequently being discovered by HMRC. Job board tax avoidance schemes are one of the latest that have been investigated by HMRC and your agency could be heavily penalised if your candidates are engaging with them.

Churchill Knight & Associates Ltd has helped over 20,000 contractors get paid in full compliance with HMRC legislation since 1998. We are providers of specialist contractor accountancy and umbrella payroll services. We work with hundreds of recruitment agencies and provide them, and their candidates, with an industry leading service. To find out more information and to refer your candidates to us, call 01707 671645 or email agency@churchill-knight.co.uk.

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