Health workers face hardship after unwittingly being drawn into tax avoidance schemes, says CEO of TaxAid
NURSES social workers, carers and supply teachers are facing hardship after unwittingly becoming caught up in tax avoidance schemes, according to the leader of a charity which supports people in poverty who have tax problems.
Valerie Boggs, the chief executive of TaxAid, said callers to the charity’s helpline had not suspected that they might have become involved in “disguised remuneration” schemes through umbrella companies and only became aware of the danger when they received a letter from HMRC
She added: “They attribute legitimacy to the arrangement because of who they are working for.
“Calls on our helpline are now from people who have received letters from HMRC asking if they have been involved in ‘tax avoidance’.
“There is increased activity from HMRC to make people aware of the possibility that their employer is not following the rules.
“However, what can a worker do with this knowledge and what is their understanding of how they have been remunerated?
“A catalyst for some of this activity has been the disguised remuneration initiative from HMRC following legislation in 2019 that applied a tax charge on those who had been remunerated partially by contractor loans.
“The legislation applies a tax charge on any loan not repaid at April 5, 2021,’ said Ms Boggs.
However, due to a “cruel twist” taxpayers are having to pay the tax charge on the ‘loan’ that HMRC is charging as though it was income, Ms Boggs said.
“These loans are being sold on to debt recovery companies and people are being served with statutory demands to recover the amount of the loan.
“This is like being paid your salary, and then several years later, being told the tax wasn’t paid on it so that you are asked to pay the tax.. Some time later, you are asked to repay the amount of your salary.
“So far it has not been possible to stop this happening. This is creating hardship for those unwittingly caught in these arrangements.”
Meredith McCammond, technical officer at the Low Incomes Tax Reform Group, said the loan charge policy didn’t draw a line under disguised remuneration in a way that everybody had hoped.
She said a review into the loan charge had found that in the financial year 2018-2019 there were still thousands of users of these schemes.
She added: “This can be explained by the fact that it is no longer mainly about workers making a choice to enter into disguised remuneration.
“It seems to us that the use of disguised remuneration schemes is driven by the motivations of other entities in the supply chain rather than the workers.”
Julia Kermode, the founder of iwork.co.uk, which protects the UK’s independent workforce, added: “Unfortunately these situations are increasingly commonplace with workers having no idea that they might be in a tax avoidance scheme.
“They never think for one moment that there could be anything amiss with their payment arrangements, incorrectly believing them to be legitimate by virtue of who they are working for.
“These schemes are nothing new, and promoters deliberately target professions where they know people are unlikely to question how they are paid, providing they receive income when they should.”
“New, more effective legislation should also be immediately brought in to protect the innocent workers who are simply doing their jobs and contributing to the UK’s recovery.”
The Government recently published plans for a new single enforcement body. A spokesman said that this new body will include umbrella companies in its remit, and will have new powers to tackle non-compliance.
A HMRC spokesman confirmed that it has started sending people early intervention letters where it is believed they might be in an avoidance scheme to give them the chance to get out as soon as possible.
The spokesman said: “This was a recommendation from the Morse review (the review of the controversial loan charge policy).
"It’s a good thing that we’re informing people as soon as we can, or we’ll end up with similar stories to those which you have heard and covered in your work about people finding out later that the scheme they used a few years before was avoidance.”