Further updates to HMRC’s list of tax avoidance schemes

HMRC's list of named tax avoidance schemes has been updated once again, but what does that mean for contractors?

In April of 2022, HMRC introduced its very own list of named tax avoidance schemes, promoters, enablers and suppliers. Citing it as the first step in a plan to tackle tax avoidance, HMRC have been updating the list periodically over the last year in an effort to “help people identify and steer clear of these schemes”.

As of 20th April 2023, there are 36 schemes named on the list. With two names added on the 20th, Acacia Resourcing Services Limited and Marquee Ltd, and perhaps more notably two schemes removed from the list just days prior. But this removal shouldn’t be mistaken for HMRC giving the green light.
 

Updated but ‘not a complete list’ of schemes

Whilst the list receives seemingly regular updates from HMRC, it is by no means exhaustive, with HMRC themselves stating “This is not a complete list of all tax avoidance schemes currently being marketed”.

Should a contractor visit the list and find none of the organisations they engage with listed there, it doesn’t mean that they can breathe a sigh of relief just yet. HMRC states that other schemes exist that they “cannot publish information about at this time” due to a variety of reasons such as the continued process of gathering information on the scheme itself, or because HMRC are simply “not aware” of the scheme.

With yet undiscovered schemes sailing under the radar, it’s clear that we’re not out of the woods yet.
 

The timer is ticking for HMRC’s guidance

In accordance with the Finance Act 2021, HMRC are required to remove names of schemes from the list after a year has passed since their addition. For example, the two recently removed firms were not removed because they had been investigated and given the all clear. Absolute Outsourcing Ltd and Purple Pay Ltd, were added to the list of named tax avoidance schemes in April 2022 and quietly removed a year later on April 5th 2023 in accordance with the legal requirement set out by the Finance Act 2021.

Our CEO, Seb Maley, offers his view of the situation:

"Contractors have been the targets of tax avoidance schemes for decades. Whilst users of these schemes garner little sympathy from the public, the reality is that many contractors will have unwittingly joined them in good faith and without any intention to avoid tax. Despite much government focus, new schemes are constantly appearing and it is vital that contractors take due diligence prior to engaging with any apparent payroll or umbrella company”.

With HMRC seemingly so keen to “help people identify and steer clear of these schemes”, it seems inconvenient that this ‘help’ comes with an expiry date. The organisations phased out of the tax avoidance scheme list may seemingly be free to continue as before, leaving those engaging with them unaware.
 

Tax avoidance scheme list provides important examples of what to look out for

Despite the fact that named tax avoidance schemes will slowly be disappearing from this list after their year is up, the list still holds value. The report created by HMRC isn’t just an alphabetised list of company names. Each name listed includes information about the scheme, details of any additional or alternative names and an explanation on how the scheme works. This will include the often complex – but always contrived – mechanisms used by the promoter to avoid tax.

This means that the list is a valuable resource. Contractors can compare companies they have links with to those schemes listed to see if there are notable similarities in the way that they function. It essentially provides a list of criteria for companies that HMRC deems suspicious.

Contractors should try to use this resource to their advantage. Whilst it certainly has its flaws, keeping a keen eye on the list of tax avoidance schemes and using it as a point of reference could serve contractors well. Reviewing the way these schemes work is advisable, even if the name of a specific entity does not appear on the list.