HMRC are going to tax agency workers back 20 years

[Pirie]

So it appears many of us working through agencies are going to get life changing bills from the revenue:

How can this be real. Anyone had a brown envelope about this yet?

Exactly, notthemrmenagain. You can disagree with it if you want, but the likes of those companies have structured their affairs in entirely legal ways and until laws are changed there’s nothing they can be ‘got’ for. If a large company were structuring their tax affairs illegally I imagine HMRC would be very keen to prosecute, not least to disprove this kind of thinking...

I feel sorry for the poor sods affected by this. Taxation is theft.

Your ability to read and write was paid for by taxation, you utter spoon.

OK so my reading of that is that it's not going after those agency workers who got pretty much bullied into agreeing to be paid through umbrella companies (which would be an absolute timebomb of suck for some very vulnerable people), it's a scheme where you'd only be doing it with the big intention of dodging the fuck out of as much tax as you could.

I'd love to see the agencies who forced people onto umbrella companies bollocked and clamped down on though - because that was some shitty bullshit.

To all of those posters saying that HMRC should “go after the big boys”, e.g. Starbucks, Amazon etc - how can they go after them when they’re doing nothing illegal? The government needs to close the loopholes that allow these sorts of companies to pay such minimal rates of tax before HMRC can do anything, unfortunately.

Which is exactly what I said crimson.

poster Libertarian. How would you suggest the state pay for services that keep the country running? Police, hospitals, schools etc? Genuinely interested.

No one said big companies were doing anything illegal.

Loopholes can be closed.

If companies 'find ways', to avoid, then government/agencies should themselves pay people to also 'find ways' to close down, ASAP.

1. This is about tax evasion (a crime) not avoidance.
2. Agency workers usually have not been paid with weird kind of loan schemes that most workers would not touch with a barge pole as it was always as dodgy as anything.
3. So most agency workers have nothing to fear. They will have paid their tax and that's fine.

However if you paid a lot less tax by getting a "loan" payment to you then you may well have extra tax to pay and have had years of getting a lot more income than those who were self employed (like I am) and paid full tax.

Vis a vis Starbucks etc, surely the question we should be asking is "why haven't these laws been changed yet?*

George said he'd do it, pretty sure Gordon said he'd do it, I think even May has said it'll be done. But not yet.

HMRC got contractors a few years back - contractors who worked exclusively for 1 company suddenly found themselves taxed as employees.

@PeridotCricket - through subs schemes. People could opt in for the services they want.

Jux - because it's not simple to do. The issue is what can a company charge for licensing its intellectual property. Clearly they should be allowed to charge - you are more likely to go into a cafe that is called Starbucks than Xenia so clearly the trade mark has a value. Many companies not even for tax reasons have one limited company in one country that owns all the group's thousands of trade marks otherwise they would need non experts to manage that in 100 countries - again that is not tax avoidance even. However where they base the company that is paid the royalty on the licence of IP might lawfully be in a lower tax place.

I htink Starbucks paid or pays 6% of its turnover as a royalty to use the traedc mark. That is very similar to the percentage I see every month from people who buy a franchise and then pay a fee to the company that owns the trade mark so it not really a weird tax avoiding thing but a normal fee to use a trade mark. Now we could change the law to say if you pay a royalty for use of a trade mark you can only set it against your tax if you license it from someone in the UK but that's not going to work for many companies eg loads of UK businesses buy a franchise based in the US or elsewhere and pay their trade mark royalty fee there. If they could not deduct that 6% from their profits before tax they would go out of business as plenty of them hardly make 6% profit on their overall turnover as it is.

That does not mean it is unsolvable but it is hard to legislate.

We could also name certain tax haven countries and ban tax deduction of royalites to those countries but that still leaves us with places like Ireland where company taxes are very low and people might choose to be based.

This was on radio 4 last week. People must have known something wasn't quite right if you didn't need to pay tax and national insurance on your wages.

I agree with Snow. If you know your gross fees from an agency / the company they play you to work for are £10 an hour then you have a pretty good idea if you earn say £25k a year what 20% tax and 13% NI etc are on that. if instead you paid a lot less and the paperwork referred to the agency making a loan to you of the money from a comkpany on the isle of man that is really weird and surely sounds alarm bells particularly as it means you were paying less tax than normal self employed people using normal agencies who do not do this.

thank for the explanation cenia

xenia

*Thank you. I know it's not illegal. I am aware.
But there are things that can be done. By Government, by HMRC that aren't. *

If there are things that HRMC could do it wouldn't be a worldwide issue, it is a lack of understanding.

The tax system in the UK works fairly well and we have one of the most compliant set of companies and individuals in the world actually so HMRC are not doing so badly and nor are the UK tax payers.

I think it was a mistake to make the single person tax allowance so high as a lot of people now pay no tax at all which makes them in a sense not feeling part of the system and taxes are too high on some of us - never in English history have we higher tax payers paid the highest burden of tax.

They have tried for decades to do tax simplification but never manage it - cannot even merge tax and NI.

Agency workers paid these kinds of loans who owe back tax should look at whether there are any test cases going on about the situation and secondly negotiate with HRMC - take advice from your union/contractor association if you have one and if enough money at stake from a tax expert. HMRC may allow staged payments but are not always that accommodating and seem quite quick to bankrupt people. Some people have been to their MPs about this particular issue of loans as pay.

There is a similar issue with some one person limited companies where the directors took money out as a "loan" rather than the more usual PAYE salary or dividends on shares although I am not sure if that one lawful or not.

This HMRC guidance on the contractor loan schemes is from 2016 www.gov.uk/guidance/contractor-tax-loan-schemes-can-cost-you-more

It looks like HMRC is encouraging people to settle before next year to ensure they may pay less but note the word may in their notice - www.gov.uk/guidance/disguised-remuneration-schemes-affected-by-the-loan-charge-spotlight-44. If there are test cases saying the schemes are lawful then people would not get their money back from HMRC later so best to speak to a tax expert on how likely a particular scheme is to be lawful or not.

Look at this one - one agency suggesting people would get 85% tax home pay (i.e. 15% tax) - people are adults and should have realised this was too good to be true when basic rate tax/NI is about 33%!

www.contractoruk.com/forums/hmrc-scheme-enquiries/127899-agencies-loans-company-under-spotlight.html

I do understand the tendency to point the finger at Amazon and Starbucks. They were hugely public cases and although the companies have done nothing illegal, they weren't acting within the spirit of the taxation regimes of the countries where they're active. However it can be - understandably - difficult for people to understand that the spirit is different to the letter of the law.

HMRC don't get away from this scot-free. It has dropped the ball previously with Vodafone - which owed over £6bn (yes, BILLION) which HMRC agreed to waive after a long-standing dispute.

That's what sticks in the craw; the fact that a big company can use its name, deep pockets and general intransigence to get its own way. Can you imagine HMRC doing that for Joe the plumber?

The phrase which annoys me most from the OP is :

"so it appears many of us working through agencies are going to get life changing bills from the revenue"

Scaremongering at its best. As Xenia says if you were part of this scheme, you'd know about it. it was not a standard agency arrangement - most people working through an agency are on PAYE.

Your ability to read and write was paid for by taxation, you utter spoon.

To those who say what the big companies are doing to avoid tax is legal and what the one-man bands that HMRC is going after wasn't, you are missing one important fact. The government has changed the law retrospectively to make illegal something people thought was legal.

Making things illegal retrospectively is usually not allowed by European human rights law, but there is an exception that says it is allowed for tax law. Though I think it's only supposed to be used to "clarify" the law so that it says what everyone already thought it said. It turns out that with tax law, if there's any grey area, what most people (HMRC and taxpayers) think it means tends to coincide with their own financial interest.

I suppose the reason HMRC can't perform the same trick on big companies is because how multi-nationals are taxed is constrained by international treaties.