HM Revenue & Customs’ (HMRC) list of non-compliant umbrella companies now includes details of nearly 100 firms operating tax avoidance schemes.
On 12 September 2024, HMRC added four more non-compliant umbrella companies to its list, bringing the total to just under 100 – up from 50 a year ago.
Among the new additions is Tamworth-based 1st Choice Umbrella, which has been issued a “stop notice” under HMRC’s Promoters of Tax Avoidance Schemes (POTAS) regime for discrepancies in tax treatment on contractors’ payslips.
Isle of Man-based Adapt and its UK counterpart TGI Payday have also received stop notices for providing a loan-based remuneration scheme to contractors.
Birmingham-based AI Global Workforce is listed for providing “payment advances” to contractors without deducting income tax or National Insurance Contributions.
Liverpool-based Solucionis has two entries on HMRC’s list for tax avoidance schemes, with the latest under POTAS for artificially separating remuneration into taxable and non-taxable elements.
IT contractors have been ensnared in tax avoidance schemes by non-compliant umbrella companies promising high take-home pay rates.
These companies use methods to reduce contractors’ employment tax, including using non-taxable loans instead of conventional salaries.
HMRC has been cracking down on these practices and recovering unpaid tax through its loan charge policy, leading to significant tax bills for many IT contractors.
The list of non-compliant umbrella companies has doubled in length in the past year due to a legislative change allowing the names of tax avoidance schemes to remain on the list indefinitely.
HMRC can republish the names of companies removed from the list if evidence of continued tax avoidance is found.
Despite interventions like early intervention letters, more action is needed to protect contractors from non-compliant umbrella companies and tax avoidance schemes.
Qdos CEO Seb Maley emphasized the need for urgent regulation in the umbrella sector to prevent tax non-compliance and exploitation of flexible workers.
Maley called for government intervention to address the rise in non-compliant umbrella companies due to increased demand from IR35 reforms.
Regulating umbrella companies and addressing the Loan Charge scandal are crucial steps to ending exploitative work practices, according to Maley.
