27 July 2023
HM Revenue and Customs (HMRC) has added a new name to the current list of named tax avoidance schemes, promoters, enablers and suppliers.
The company, Easyway Umbrella Limited, was using the familiar method of making a payment close to National Minimum Wage and topping this up with other remuneration that was not taxed. The disguised payment of a loan or other credit is deemed to be normal income by HMRC and should therefore be taxed.
In addition to this an unnamed company, referred to as “Company X” has been added to the list of tax avoidance schemes subject to a stop notice. Here is HMRC’s explanation of how the scheme that promted the stop notice is promoted:
Scheme users sign a Contract for Employment and a Master Advance Agreement with Company X. The Contract for Employment says the scheme user will be paid the National Living wage (NLW) for their services which are provided to 3rd party end clients. The Master Advance Agreement provides that Company X will make advances to the scheme user in its capacity as sole trustee of a settlement known as the “Company X Settlement”.
Scheme users provide their services to the end client who makes payment for the work done. Company X then pay the scheme user a single payment which is comprised of two elements, the first is a salary at the NLW rate for the hours worked and the second is the advance. Both elements are shown as “income” on the payslip provided by Company X to the user. However, only the salary element is paid after deductions of income tax and National insurance contributions (NICs), whereas the advance element is paid without deductions of income tax and NICs.
It is important to spread awareness of these schemes and to not get caught up in them. But, if you think you are involved in one, you can contact HMRC for assistance and guidance.
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