19/03/21

UK: Tax avoidance promoters shift focus to middle-income earners.

As published on ftadviser.com, Thursday 18 March, 2021.

Tax avoidance promoters have shifted their focus towards middle-income earners and away from higher-income investors, according to HM Revenue & Customs.

In a report on the use of marketed tax avoidance schemes, the tax authority’s director for counter-avoidance, Mary Aiston, said the market had “decisively shifted” towards employment-based avoidance schemes aimed at middle-income earners, including contractors and agency workers.

While HMRC noted that investment avoidance schemes had “largely disappeared”, it added that the market was dominated by disguised remuneration avoidance schemes.

According to HMRC, it had also seen avoidance schemes where workers are paid their income in the form of what are said to be grants, salary advances, capital payments, credit facilities, annuities, shares and bonuses, or amounts claimed to be held in a fiduciary capacity.

Typical claims made by promoters in advertisements include: “Keep up to 90 per cent of your contract income – we can put you in touch with highly tax-efficient remunerations options” and “50 per cent off processing charges for key workers”.

Indeed, Aiston described promoters as “hugely opportunistic”, saying the tax authority had seen NHS workers who had returned to the frontline to battle the coronavirus being targeted over the last year.

HMRC said: “[The] fact that promoters of avoidance schemes targeted nurses and other NHS workers, indicates an increased level of interest from promoters in individuals on middle-incomes.”

“The schemes are being targeted at middle-income earners who are assumed not to have specialist advice,” says John Hood, a tax partner at Moore Kingston Smith.

“But the best advice is that if the scheme is overly complex, if payslip salary is shown as a loan for example, then it is likely to be dodgy.”