Tax Avoidance - don’t get caught out

27 November 2020

Tax Avoidance occurs when people bend the rules of the tax system to pay less than they owe. If it seems to good to be true – then it probably is. This HMRC campaign aims to highlight the risks to the tax payer of signing up to schemes that make false promises, by pointing out some of the signs to watch out for.

Spot the signs of tax avoidance provides details of the warning signs that exist, and the steps that should be taken if to check if a scheme is genuine such as:

A scheme that allows you to keep more of your income than you would expect

Be wary as you could be avoiding tax and not paying the full amount of Income Tax and National Insurance contributions (NICs) on your income. When you see such offers, bear in mind the basic rate of Income Tax is 20% and you also need to pay NICs on top.

Some or all the payments you get are said to be non-taxable

These payments may not appear on your payslip and could be described as loans, annuities, bonuses, shares, fiduciary receipts, credit facility, capital payments/advances or something similar. These payments are no different to normal income, so you need to pay Income Tax and NICs on them.

The scheme is ‘approved’ by HMRC

You may be told the schemes are safe and compliant or approved by HMRC. This is not true, HMRC does not approve schemes.

Only part of the total payments you received are taxed as income

If you are employed this is often close to the national minimum wage, even though you are actually receiving much more than that for the work you do.

Such schemes should be reported to HMRC either through the online Report fraud to HMRC - GOV.UK making sure you enter the words ‘Contractor campaign’ in the ‘Other information’ section.

You can also phone HMRC on 0800 788 887 or if you are outside the UK, phone +44 (0)203 080 0871.

Read the stories of Tanya and Duncan who each got caught out by such schemes

Information provided in this news article may be subject to change. Please make note of the date of publication to ensure that you are viewing up to date information. Download the CIPP's Payroll: Need to know - your guide to payroll legislation and reporting for the most up to date data.