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Contractor Understanding of Tax Avoidance Schemes
Contractor understandings of Tax Avoidance Schemes
Conducted between August 2014 and November 2014
Survey Findings & Analysis:
A recent survey by industry body All Umbrella Companies Are Equal has revealed that HMRC are just not reaching their target audience. Is it that tax is just too taxing or are heads being buried in the sand?
The Offshore and Onshore Intermediaries Legislation had massive implications for the contracting world but over 70% of people who responded to the survey had never heard of them. The Onshore Intermediaries Legislation meant that 1000’s of workers who, for years, had been in the CIS scheme were, all of a sudden, liable for PAYE taxes which, if their contract rate was not increased, reduced their take home pay significantly. Although there were many articles published by umbrella companies, industry bodies and recruitment agency representatives the message just didn’t get across which resulted in strikes and protests by the affected workers when the changes came into force.
Maybe it’s that information that comes from HMRC is just not as targeted as it should be or maybe it’s that people just don’t want to hear it? Alternatively it could be that there is too much ‘misinformation’ for the message to be clear. Tax avoidance is extremely high profile at the moment and HMRC’s clampdown has been well publicised, yet 67% of people responding to the AUCAE survey said that they had been approached by tax avoidance promoters ,calling themselves umbrella companies, offering ‘high reward, low risk’ schemes. These scheme operators can appear very credible and with 87% of those surveyed not knowing the penalties for tax avoidance the ‘high reward’ must be very tempting. Yet contractor forums are full of tales of suffering from those who have used such schemes and been caught out by HMRC!
Lucy Smith of AUCAE said “industry bodies, umbrella companies and recruitment agencies are all useful resources for contractors to keep up to date with changes in legislation but HMRC must do more”. She suggested that a section of HMRC’s website be dedicated to those issues which affect temporary workers.
If the survey results are indicative of public awareness then surely this suggestion would benefit not only the contractor industry but also HMRC in their pursuit of tax collection.