What are tax avoidance schemes?

Tax avoidance schemes (or off-shore intermediary companies) are set up and designed to increase take-home pay by avoiding the usual tax rules – they are often portrayed as off-shore loan schemes or trusts and based outside of the United Kingdom. They claim that the payment options they are using are non-taxable. However, these payments are no different from expected income, and therefore tax, and National Insurance contributions still apply as usual.

Why are off-shore intermediaries not compliant?

When you are using a compliant umbrella company, such as Unique Payroll, or an agency PAYE, the basic income tax rate is 20%. If you are earning £8,632 or above per year, National Insurance Contributions will be applicable. After the required deductions are made, you can expect to retain around 65-70% of your earning.

So when you see companies advertising up to 95% take-home pay, they will be using a tax avoidance scheme.

How do I know if it’s a tax avoidance scheme?

There are some clear and easy indicators when it comes to spotting one of these schemes:

• They claim you can keep more of your income than you would expect
• Some, if not all, of your salary, is said to be non-taxable
• They say that the scheme is ‘approved’ by HMRC (HMRC does not approve any scheme)
• Only a section of the total payments you received is said to be taxed as income

Are there any penalties for using a tax avoidance scheme?

If HMRC becomes aware of you using one of these schemes, they will make you pay back all of the money they believe you’ve received from the company, and you can be fined up to £10,000. Even when using someone else for payroll, everyone is legally responsible for their tax affairs and paying the right amount of tax.

You can report any scheme you are approached about or see being advertised by using HMRC’s Report Tax Fraud Online form, this can be done anonymously. Ensure you use the words’ Contractor campaign’ when filling out the ‘Other information’ section.

You can also phone HMRC on 0800 788 887 – if you’re outside the UK, phone +44 (0)203 080 0871.

Unique Payroll

Over the years, we’ve learned how to give our employees a service they can rely on. There are no hidden fees or additional extras and no sign-up or leaving costs, just a stress-free, sleep-easy umbrella service that offers total peace of mind regarding your payroll. We operate in full compliance with all HMRC legislation and UK tax law.

If you’re looking for a reliable umbrella company, contact Unique Payroll today by calling 01473 461 028, via email contactus@uniquepayroll.co.uk, or visit  https://uniquepayroll.co.uk/.