Tax avoidance scheme warning from HMRC for fleets and drivers

HM Revenue & Customs (HMRC) has issued a warning to temporary workers and contractors working in the haulage sector not to get caught out by non-compliant umbrella companies selling tax avoidance schemes.

Tax avoidance involves bending the rules of the tax system to try to pay less tax, says HMRC.

It explained that the tax avoidance schemes offered by some umbrella companies involve giving a worker some or all of their pay in, what is claimed to be a loan, salary advance, grant, annuity or any other payment they are told they are not expected to pay back.

These payments are then put forward as non-taxable, often without explanation, with the promise of higher take home pay.

HMRC says that vast majority of these schemes do not work and are successfully challenged by it in the courts and at tribunals.

It warned that those who join avoidance schemes end up having to pay the tax due in the first place – as well as interest and potentially penalties.

That is on top of the fees they have already paid for joining the scheme meaning those who get involved in tax avoidance can end up paying considerably more than the tax they originally tried to avoid.

HMRC is encouraging commercial fleet operators to inform their temporary workforce about the risks and warning signs of these tax avoidance schemes.

As well as protecting drivers, HMRC says it will help protect fleet operators against tax compliance checks, penalties, tax liabilities and reputational damage caused by using a worker involved in a tax avoidance scheme.

How to spot when an umbrella company is operating an avoidance scheme?  

Avoid any umbrella company that:  

• Pays part of a worker’s salary in the form of loans or other non-taxed payments.  
• Claims to be able to significantly reduce a worker’s tax liability.   
• Makes unrealistic promises about a worker’s take-home pay.  
• Tells a worker that their scheme is approved by HMRC – HMRC does not approve any umbrella companies or tax avoidance schemes.
• Pays more money into a worker’s bank account than is shown on their payslip.

What should a worker do if they’ve used a tax avoidance scheme?  

HMRC encourages anyone who thinks they may have joined an avoidance scheme to contact them. 

Its aim is to get workers back on the right track and offer them support. If they cannot afford to pay everything in one go, HMRC may be able to offer them an instalment arrangement to pay the tax and any interest due.

For further information and to get out of an avoidance scheme they can email HMRC at CAGetHelpOutOfTaxAvoidance@hmrc.gov.uk.

What can your workers do to protect themselves?  

HMRC regularly updates its educational campaign designed specifically for contractors working through umbrella companies to help spot the warning signs of tax avoidance and what workers should do if they are caught up in an avoidance scheme.

The campaign includes a risk checker to help workers spot whether any of their contracts could involve tax avoidance.  

What is HMRC doing to tackle non-compliant umbrella companies?  

Since April 2022, HMRC has been publicly naming tax avoidance schemes and their promoters in order to help taxpayers steer clear of, or exit, avoidance.

This is not a complete list of all tax avoidance schemes currently being marketed nor a complete list of all promoters, enablers, and suppliers.

HMRC will continue to publish further details of schemes and their promoters.   

In addition to this, HMRC says it is using the full range of our powers to disrupt promoters of tax avoidance and drive them out of business.