After a legal battle with HM Revenue and Customs (HMRC), a tax avoidance scheme promoter has been handed a fine of over £1 million. Keep reading and find out more about this ground-breaking case, including details of the company that has been punished and how the £1 million fine was calculated.
Overview
Having lost a First Tier Tribunal, Hyrax Resourcing Ltd has been handed a fine of over £1 million for promoting a tax avoidance scheme (disguised remuneration arrangement). The jaw-dropping fine handed to Hyrax is almost the maximum possible.
The scheme that Hyrax promoted involved transferring workers’ funds offshore and paying them in tax-free loans. The “scheme was the successor to the K2 avoidance scheme that made headlines in the early 2010s.”
How did the tax avoidance arrangement work?
The tax avoidance scheme that Hyrax failed to report to HMRC involved paying workers with National Minimum Wage (NMW). The rest of the workers’ funds were sent to an offshore trust in Jersey (Channel Islands) and then paid to the worker in loans that didn’t need to be repaid (avoiding the correct tax and National Insurance Contributions).
A “stark warning” to anyone promoting tax avoidance schemes
Director of Counter-Avoidance at HMRC, Mary Aiston, said:
“This £1 million fine should serve as a stark warning to tax avoidance promoters. Those who ignore their legal duty will face serious consequences.
“We actively tackle promoters of tax avoidance schemes and are determined to drive them out of business. We continue to use the full force of the law to challenge tax avoidance scheme promoters.”
It’s “about time” promoters were heavily punished
In response to a Tweet commenting on the case, Chris Bryce, CEO of the Freelancer and Contractor Services Association (FCSA), said:
“About time!
Better the scheme promoters are targeted rather than the unwary who get caught out by their fancy marketing and “counsel’s opinions”.”
In another Tweet, Chris Bryce said:
“Good to see that HMRC have gone after a scheme promoter rather than the people targeted by them.
Iffy schemes kite this are often very slickly marketed with glossy websites, persuasive sales scripts and (very dubious) “counsel’s opinions” only available under NDA.”
HMRC has been naming and shaming tax avoidance schemes
It’s no secret that HMRC has been increasing its efforts to crack down on tax avoidance schemes and the people promoting them. Recently, HMRC has named and shamed seven tax avoidance schemes to help contractors and freelancers avoid them and companies that may be referring candidates to payroll providers. To date, the named tax avoidance schemes by HMRC are:
- Novus Consultants Limited (formerly Novus Limited) / Contractor Corner Accounting Limited
- Paybox Umbrella Limited
- Peak PAYE Limited
- Saxonside Limited
- T2 Outsourcing Limited
Engaging in a tax avoidance scheme could have serious consequences. If you believe you have used a tax avoidance scheme in the past, or you’re currently being paid by one – you should contact HMRC to report the scheme and settle your tax affairs.
Top 10 umbrella companies
It can be pretty daunting if you’re looking for an umbrella company. There are over 500 providers to choose from in the UK, so how do you know which ones are compliant and which ones could land you in trouble with HMRC? To help make your life easier, we’ve compiled a list of our top 10 umbrella companies. They are all accredited by the FCSA or Professional Passport, and some have special offers at the moment. Please check them out now.
