Not only can tax avoidance schemes land temporary workers in extremely hot water with the tax man, but they can damage the reputation of businesses in the supply chain if they refer to them, even in error. To help combat tax avoidance and to raise awareness of non-compliant providers, HMRC regularly updates its list of “named tax avoidance schemes, promoters, enablers and suppliers”.

In September, the amount of named tax avoidance schemes reached 100. Keep reading for more information about HMRC’s list of named tax avoidance schemes, the dangers of using non-compliant payroll providers and how to pick a compliant umbrella for PAYE payroll.

HMRC’s list of named tax avoidance schemes

Available on the government’s website, HMRC is regularly updating a list of named tax avoidance schemes (available here).

The growing list includes the names of payroll providers that HMRC believes are processing payroll non-compliantly. Any business on the list should be avoided at all costs. The list, which has been expanding for a couple of years, has now reached 100, with over 10 new tax avoidance schemes named in August and September 2024.

At the time of writing, the list was last updated on 12th September 2024, with three new companies added – 1st Choice Umbrella Ltd / Omni Contactors PCC Ltd, Adapt Ltd / TGI Payday Ltd and AI Global Workforce Ltd.

It’s worthwhile checking HMRC’s list regularly to ensure you only engage with trustworthy payroll providers.

HMRC’s list of named tax avoidance schemes represents “significant progress compared to the past”

Sebastian Sauca, founded of SafeRec, told Contractor UK he is encouraged that HMRC continue to share the names of newly identified tax avoidance schemes.

“HMRC’s efforts [with the list] undoubtedly contribute to this growing awareness within the industry. [And] it’s encouraging to see that HMRC remains committed to holding these companies accountable.

“While these actions alone may not be enough to entirely eradicate the problem, I am an optimist, and they still represent significant progress compared to the past.”

Andrew Trodden, Marketing Manager at Churchill Knight Umbrella, explains the significance of FCSA accreditation and SafeRec certification.

“Tax avoidance schemes are dangerous, and frustratingly, they have tainted the reputation of the umbrella company sector. While most umbrellas provide a reliable service driven by compliance, tax avoidance schemes are still widespread. They offer temporary workers inflated take-home pay while pretending to operate compliantly with HMRC’s rules and regulations. It’s not just the workers at risk of a tax investigation; agencies are also at significant risk should they refer workers to non-compliant providers, even by mistake. Simply put, tax avoidance schemes are evil and must be dodged at all costs.

The commendable efforts of HMRC in combating tax avoidance are evident in their increasing awareness campaigns. However, the fact that the list of non-compliant providers is expanding is a cause for concern for the entire supply chain.

Churchill Knight Umbrella provides a compliant and efficient PAYE payroll service. We are proud to be accredited by the Freelancer and Contractor Services Association and certified by SafeRec.

As part of our FCSA accreditation, our processes have been independently audited to ensure they abide by the highest compliance standards. We’ve also passed all our annual audits, showcasing our ongoing commitment to providing the best service for our umbrella employees and partnered recruitment agencies.

As soon as SafeRec entered the marketplace, we were determined to become a certified member. For those unfamiliar with SafeRec, it has completely transformed compliance within the market. Saying we’re compliant is one thing, but SafeRec allows us to prove our compliance to the supply chain.

All our employees have access to payslip audits each time we pay them – providing a summary of the deductions and confirming they’ve been paid correctly. And, our partnered agencies have access to monthly audit reports. These reports include information on every payslip we’ve issued their candidates and show that we’ve processed payroll correctly. Should any issues occur, the entire supply chain is alerted, meaning SafeRec certified umbrella companies have nowhere to hide.”

What is a tax avoidance scheme?

Contractors and freelancers working on temporary assignments inside IR35 may be required to use an umbrella company for their payroll (a third party specialist payroll provider). The role of an umbrella company is to act as the employer of the worker for payroll purposes and to ensure that workers are paid compliantly with HMRC’s tax system – Pay As You Earn (PAYE).

Unfortunately, while most umbrellas in the UK provide a compliant and dependable service, there is a growing number of tax avoidance schemes offering inflated take-home pay, and the risks of engaging with such as company could be catastrophic.

Tax avoidance schemes come in many forms, but they all tend to follow the same principle – unethically inflating a workers pay. Here are a few of the unethical methods tax avoidance schemes have been known to offer workers:

  • Salary advance
  • Non-taxable loan
  • Grants
  • Annuities
  • Credit facility
  • Bonuses
  • Shares
  • Fiduciary receipts
  • Capital payments

Usually, a tax avoidance scheme will process pay without making PAYE deductions, and sometimes, workers are paid via a third party they’re unfamiliar with. If you ever engage with a company that does not process transparent Pay As You Earn (PAYE), you should stop using them immediately and contact HMRC to settle your tax affairs.

How to spot a tax avoidance schemes

Tax avoidance schemes can be difficult to identify. However, here are some of the most common warning signs that a payroll provider may not be processing your payroll compliantly:

  • They’re based outside of the UK.
  • They do not have an established trading history and the company was formed recently (usually within the last 3-6 months).
  • It’s difficult to identify the key figures behind the company.
  • The company offer inflated take-home pay calculations, and use misleading terminology such as “HMRC compliant” and “pay less tax”.
  • The company’s website does not include much information about the business, who they are, how they operate and why they are compliant.
  • They do not have any professional accreditations or certifications (such as accreditation from the Freelancer and Contractor Services Association or certification from SafeRec).
  • They process payroll in unusual ways, such as the list in the section above. Compliant umbrella companies will process payroll in accordance with PAYE, and all deductions should be clearly explained to you before you register with them.
  • The scheme has been issued a Scheme Reference Number – a code that HMRC assigns potentially non-compliant payroll providers while they’re under investigation.
  • The company is on HMRC’s list of “named tax avoidance schemes, promoters, enablers and suppliers”.

What should you do if you believe you may have engaged with a tax avoidance scheme?

HMRC has a dedicated mailbox you can contact if you believe you are using a tax avoidance scheme and want to stop. Please send an email to CAGetHelpOutOfTaxAvoidance@hmrc.gov.uk. More information is available here, and additional methods of contacting HMRC is available here.

You can also report any payroll provider or individual you believe may be facilitating tax avoidance. Please visit the government’s website for more information.

Request a take-home pay calculation from an umbrella company you can trust

Founded in 2017 to provide compliant payroll services for temporary workers and to partner with compliance-driven recruitment agencies, Churchill Knight Umbrella is the umbrella company you can trust. We’re proud to be an accredited member of the FCSA and we’re also certified by SafeRec.

There are plenty of benefits of using our payroll service, including:

  • Easy registration process.
  • Support throughout onboarding – to ensure you’re entirely satisfied with our service from the registration process through to being paid for the first time.
  • Same Day Faster Payments
  • Employee Benefits, including Statutory Sick Pay and Statutory Maternity/Paternity Pay.
  • Free comprehensive insurance cover.
  • Salary sacrifice – ideal for contractors and freelancers who want to tax-efficiently boost their personal pension pot.
  • Peace of mind thanks to our FCSA accreditation and SafeRec certification.
  • Access to an exciting employee reward scheme – Churchill Knight Rewards.
  • Fantastic online resources designed to help you understand umbrella companies, including our recently updated umbrella company FAQs.
  • Please click here for a comprehensive list of the benefits of our umbrella service.

Please click here to request a tailored take-home pay calculation or call our friendly Sales Team on 01707 871622.