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HMRC defends removing names of known tax avoidance schemes from public list

HMRC under fire over 'ridiculous' legislation that means it has to remove names of known tax avoidance scheme operators 12 months after publication

HM Revenue & Customs (HMRC) has defended its rationale for deleting names from its official online list of known tax avoidance schemes after 12 months after contracting market stakeholders described the strategy as “ridiculous”. 

The tax collection agency manages an online list of named tax avoidance schemes, which also includes details of the parties responsible for promoting and enabling these setups to operate and information on how each scheme reportedly works.

There are 34 known tax avoidance schemes listed on the latest version, which was last updated on 5 April 2023.

However, that update is known to have resulted in the names of two organisations being removed from the list, in line with the Finance Act 2021, which states the names of schemes must be unpublished 12 months after they are first added.

This is a situation that has garnered criticism in recent days, with Julia Kermode, founder of independent worker consultancy IWork, describing the legislation that allows the names of these entities to be removed from public record after a year as “particularly ridiculous”.

“Naming a tax avoidance scheme only to delete it from an official list a year later is crazy. How can anyone steer clear of tax avoidance schemes when HMRC’s own list isn’t up to date? It’s beyond belief,” she said. “This list isn’t a deterrent for tax avoidance schemes – it’s merely a temporary blip in the history of these so-called companies.” 

Computer Weekly has reported extensively in the past about how IT contractors have inadvertently found themselves embroiled in tax avoidance schemes after joining non-compliant umbrella companies that lure them in with the promise of “too good to be true” take home pay rates.  

These non-complaint umbrella companies use contrived methods to artificially minimise the amount of employment tax contractors pay, which includes using non-taxable loans to remunerate them for the work they do in-lieu of a conventional salary.

In recent years, HMRC has sought to clamp down on this practice and recoup the unpaid tax from these setups though the introduction of its controversial loan charge policy, which has seen tens of thousands of IT contractors saddled with life-changing tax bills.

The HMRC list is part of a series of measures the non-ministerial department has introduced to deter others from joining tax avoidance schemes and – in turn – finding themselves on the receiving end of enforcement action and payment demands,

Kermode added: “These schemes wreck lives. They lure in unsuspecting individuals upon the pretence that they are legal and compliant. Then, when HMRC comes calling, the individual is left with a devastating tax bill. Meanwhile, the scheme, along with the people running it, have disappeared into thin air.”

Fred Dures, founder of payroll auditing company PayePass, said the situation would be “laughable, if it wasn’t so serious” and that removing the names one year after publication is “appalling” behaviour.

“What’s more, the government has only been naming and shaming these schemes for one year. Fast forward a few weeks and months and, at this rate, the list will continue to shrink. It’s one step forward, two steps back – a farcical loophole,” said Dures.

“Few will deny that the umbrella industry needs regulating, yet the government still hasn’t delivered it. It means the responsibility will continue to fall on businesses engaging umbrella companies to ensure compliance and operate transparent payment processes.”

In a statement to Computer Weekly, an HMRC spokesperson responded to the claims above and said its publication strategy does have a disruptive effect on the scheme promoters.

“We ensure that all aspects of our promoter naming complies with the relevant legislation, including removing scheme names one year later in line with Finance Act 2021,” the spokesperson said.

“Naming schemes has had a disruptive effect on promoters of tax avoidance. Schemes can also be named under Finance Act 2022 and details can stay online beyond 12 months. This will continue to warn taxpayers, so that they can steer clear of them.”

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