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Stock Market Trend Forecast March to September 2019

Tax Avoidance Bills Sent to Thousands of Workers

Personal_Finance / Taxes Mar 14, 2019 - 07:36 AM GMT

By: Boris_Dzhingarov

Personal_Finance The HMRC sent out tax avoidance bills to thousands of workers recently, and it is having an impact as a result of loan charges. The result is seeing an emotional and ugly battle brewing between NHS and IT contractors who say that the demands for additional tax are destroying their lives and the tax authorities who claim they have avoided paying taxes.

At heart is the 2019 Loan Charge which is meant to claw back unpaid taxes from those that the HMRC claims used disguised remuneration schemes that were in place since 1999. Some of those receiving bills are massive and will literally wipe them out. One of those who worked in IT for years is said to have been hit with a £400,000 avoidance bill and will now be left with little choice but to declare bankruptcy.

Another who also worked in IT received a bill for £300,000. Considered he claims only to have assets worth £100,000 and an income of under £50,000, his ability to pay this is near impossible. The resulting stress of it has seen him developing thoughts of suicide as he states, “it will bankrupt me”. He blames the issue on advice received that was normal at the time while accepting contract work from HMRC 10 to 20 years ago.

Others facing similar problems were advised to sign up with an umbrella company adding that the agency they worked for stated it was fully HMRC complaint. They further stated that they would manage year-end paperwork. It also puts a face on a problem whereby unsuspecting workers cannot recall ever signing paperwork that alerted to their income being in the form of a loa. They further claim of never hearing the term of a loan being used.

At heart of the issue is how payment was given to contractor from the use of a loan and thereby sidestepping the usual income tax deducted as well as national insurance arrangements. These schemes tended to be quite complex and beyond the understanding of the normal person. An example of this would be a worker generating £4,000 being advised to use an employee benefit trust by their accountant. That amount is not paid directly to the worker. However, it is instead paid back to them in the form of a loan, therefore, circumventing the deduction of taxes with the worker only suffering the minor cost of fees. As it was designed that the loan would not be repaid, it was identified as a “disguised remuneration” by the HMRC.

As the debate heats up, most regular income paying workers are less than sympathetic at the bills those who participated, willingly or not are receiving. To date, over 40,000 people have been contacted by the HMRC with load charge demands with hopes of recovering £3.2billion in unpaid taxes. The HMRC, for its part, released an official statement that reads as follows:

“These loans are paid to people in such a way that means it’s unlikely that they’ll ever have to be repaid. In other words, the person receiving money from a loan scheme gets to keep it all. And they don’t pay any tax on this money, even though it’s clearly income. It’s highly unusual to receive your salary in loans and is clearly a method used to avoid paying tax.”

Many of those contacted claim they had little choice but to accept payment in this form while working as a contractor. Some of the monies being demanded date back over a decade. This is well past the point when tax returns are closed and being seen as nothing more than a tax grab on those least able to pay it. It is also adding insult to injury in so far that the HMRC is refusing to offer reduced settlement amounts. That is due to their position that contractors cannot challenge the charges.

This kind of deceit and those that engaged in it is generally protected as it is to ensure those that engage in off and online sports betting activities. It is meant to help avoid the pitfalls of those they prey on others. That kind of protection and regulations have helped spurned the growth of an industry often seen in a negative light. However, with respected betting sites such as BetWinner, as seen as Nostrabet, it would be beneficial to contractors to have the same kind of protections. This is something that is clearly needed, and something the HMRC would have known about for years without issuing warnings to those most at risk.

Some tax professionals, at the time, devised solutions where part of the payments would be PAYE, and part in the form of a loan, and they were told that was legal. Whether the HMRC takes a different stance towards those struggling with the notices and come to a fair resolution is to be seen. However, currently they seem unwilling, and that is where the dispute is reaching a critical mass.

By Boris Dzhingarov

© 2019 Copyright Boris Dzhingarov - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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