Loan schemes targeting agency workers continue to operate

DISGUISED remuneration schemes remain a stubborn and insidious form of tax avoidance, despite the efforts of successive Governments to stamp them out, according to a leading figure at the professional body for tax advisers.
According to the Loan Charge All Party Parliamentary Group, individuals have been targeted while promoters have faced no action.According to the Loan Charge All Party Parliamentary Group, individuals have been targeted while promoters have faced no action.
According to the Loan Charge All Party Parliamentary Group, individuals have been targeted while promoters have faced no action.

Glyn Fullelove, the president of the Chartered Institute of Taxation, welcomed the Government’s commitment to take a “robust approach” to tackling promoters but warned that schemes targeting agency workers are continuing to operate.

He added: “The workers themselves may have no idea they are avoiding tax until contacted by HMRC, by which time the umbrella company may have disappeared, leaving the agency worker to pick up the bill.”

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He made the comments as the Government launched a call for evidence on tackling disguised remuneration tax avoidance.

Mr Fullelove said the call for evidence came out of Sir Amyas Morse’s review of the loan charge.

While the review acknowledged a clear public interest in preventing the use of loan schemes, it concluded that the loan charge went too far by overriding taxpayers’ statutory protections by applying an “unprecedented” 20-year look back period.

It also failed to adequately consider the serious distress it would cause some of those affected, the review concluded.

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The review also identified failings in the approach HMRC took to enforcing the policy, which in some cases, fell short of the standards the public has a right to expect; particularly in cases where life-changing sums of money are at stake.

According to the Loan Charge All Party Parliamentary Group, individuals have been targeted while promoters have faced no action.

HMRC has issued a call for evidence for tackling disguised remuneration tax avoidance schemes.

It is asking for views and evidence on what factors are driving the continuing use of disguised remuneration tax avoidance schemes.

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Mr Fullelove added: “This is a very broad call for evidence – essentially a plea from the Government for ideas on how the remaining DR schemes and other avoidance can be stopped.

“We look forward to engaging with HMRC and providing constructive input into how such schemes can be stopped at source.”

In his report, Sir Amyas said the factors which led the Government to tackle the use of loan schemes remained, including significant usage of schemes.

Sir Amyas said: “Evidence shows that usage of loan schemes continues, with there being more first-time users in 2017-18 (over 6,000) than in any year dating back to 1998-99.”

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Sir Amyas called on the Government to improve the market in tax advice and to tackle the people who continue to promote the use of loan schemes, by clarifying how taxpayers can challenge promoters and advisers that may be misselling loan schemes.

The report called for a new strategy addressing how the Government will establish a more effective system of oversight, which may include formal regulation for tax advisers.

The strategy for communicating what is considered tax avoidance must also be improved to reflect the mass market nature of loan schemes, the report added.

The call for evidence will run until September 30, 2020. Evidence can be sent to [email protected].

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