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What is the HMRC tax avoidance blacklist? `
It’s kind of our job to shout about the benefits of working with umbrella companies, so let’s start there! For contractors working under a PAYE umbrella arrangement offers convenience, value-added services and the security of having tax and paperwork managed. For recruitment businesses, umbrellas offer increased efficiency, better candidate engagement and assured compliance. At least, that’s what the good ones do.
But what happens when you come up against an umbrella company that looks and sounds reputable on the surface? How can you be sure that everything is above board and reliable?
The unregulated nature of the contractor payroll market can conceal sophisticated tax avoidance schemes, making it difficult for even the most diligent individuals and businesses to avoid unwittingly getting involved with unscrupulous operators.
An incredibly useful resource when it comes to navigating this, is HMRC’s “named tax avoidance schemes” list.
This is a vital tool in identifying known tax avoidance schemes, their promoters, enablers and suppliers. While it is not an exhaustive list, checking it should be a key step in your diligence process when looking at what umbrella companies to work with.
What is the HMRC blacklist?
The HMRC list of names tax avoidance schemes is essentially a warning sign for businesses and contractors. It includes the names of schemes and the entities behind them that have been identified and confirmed by HMRC tax avoidance. As of 29th August 2024, the list includes more than 70 entries, with two recently added. This growing list reflects HMRC’s ongoing efforts to combat tax avoidance and protect taxpayers from the financial risks associated with these schemes.
However, it’s important to understand how the list functions. The entries are listed alphabetically and are updated whenever HMRC identifies and verifies new schemes or operators. However not every scheme is included – some continue to operate under the radar, avoiding detection.
Furthermore, entries are typically removed after 12 months due to legal obligations or specific circumstances, though this does not necessarily mean the risk is no longer there.
In some cases, HMRC may not be able to disclose certain information, particularly if there are ongoing investigations or appeals going on behind the scenes. Despite these limitations, the HMRC blacklist remains a crucial resource for anyone in the world of contracting seeking to stay informed and avoid the pitfalls of tax avoidance schemes.
Why this matters for contractors and recruiters
Working with an umbrella company or other payroll provider that is later found to be involved in tax avoidance can have severe consequences; just look at the continued devastating fallout of the HMRC loan charge scheme. Recruitment agencies and contractors may face unexpected tax liabilities, penalties and reputational damage. This makes it imperative to thoroughly do your homework on any payroll company you intend to partner with.
HMRC encourages anyone who recognises a scheme or promoter on the list, or suspects they may be involved in an unlisted scheme, to come forward. Reporting these activities not only helps protect your business but also drives rogue actors from the market and contributes to broader efforts to combat tax fraud.
How Liquid Friday keeps you safe
The very presence of an HMRC tax avoidance blacklist highlights the importance of partnering with a compliant and trustworthy umbrella company. We’re highly committed to compliance with all relevant legislation, including employment status reviews, appropriate tax deductions and statutory reporting requirements. By choosing Liquid Friday, recruitment businesses and their candidates can be equally assured that they will be protected from the risks associated with tax avoidance schemes.
To sum things up, while HMRC’s blacklist is a valuable tool, the best defence against risk is to partner with suppliers that prioritise compliance and integrity. Tax avoidance does not always look like tax avoidance, and if something looks too good to be true, it probably is!