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?

Seems to me that there is a reverse side to “dodgy scheme/ morally repugnant” coin that the U.K. Gov have minted to make the Loan Charge acceptable. Here we have Employment Based Trust arrangements which are totally legal and have been available to those that could afford them for many years. The crunch for this type of arrangement came when they were made available to the hoi polloi. Very difficult to outlaw, Trust Law, they were of course and remain legal.
So, as more and more of the little people take advantage of these arrangements, over 20 years it seems and still apparently doing so, HMRC stand there with JT in hand unable to do FA. We now have a Loan Charge, not a collection of tax, but a “charge”, tax would be collected through an Enquiry Closure Notice. So, my concern is that if HMRC see other areas of perfectly legal tax avoidance that are producing unforeseen losses in its revenue will it just introduce a “Charge”; the ISA Charge, the IHT Charge!

What utter drivel

This type of aggressive scheme targeted high earners who should have been sophisticated enough to understand the risks.

There would have been no/minimal advantage for anyone only paying basic rate income and so these were not marketed to eg nurses.

People are trying to conflate separate issues (forced ‘self employment’ of low paid workers) with an issue of sophisticated high earners predominantly in Finance and IT contracting, who entered into aggressive tax avoidance schemes. HMRC can and do close loopholes on such schemes.

Anyone who was part of this and said they didn’t understand is talking bollocks.

OP I am struggling to understand you latest post. Not sure what an Employment Based Trust is (do you mean Employee Benefit Trust?).

There is a huge difference between ISAs and the 2019 Loan Charge. ISAs are a government recognised tax wrapper to encourage investment. The loan charge is levied on salary payments deliberately mis-stated as loans. Basically, fraudulently understating income to evade a tax liability. This is not a loophole that has been closed, it never was legal.

What HMRC are doing is saying if it's a loan, pay it back. If it never was a loan, you have to pay tax like honest people.

fwiw, only 3% those affected work in medical services or teaching, and this includes doctors practicing privately. The average person affected earned double the average UK wage.

HMRC expect it to raise over £3bn.

There are schemes for employees to own share in the company which have some tax advantages. That is nothing to do with the self employed joining dodgy loan schemes.
The state can change the law on employee share schemes if it wants to and it does from time to time.

The loan schemes were not joined by most contractors as they could see they were unlikely to be lawful.

Also it does not matte rwhat is morally repugnant and what is not. The bottom line is does it breach the black letter of the tax law and it seems loan schemes (surprise surprise do). No one is really surprised at that though.

My husband works in construction - currently mechanical installer. One thing people don’t get is that even on small domestic jobs say basement construction. You the owner employ the builder. The builder then subs work out to the different trades who may even sub it out again and again. Each of those people even if they work for a company will classed as self employed. I don’t know anyone who is construction being anything but self employed. He was told in this job that he had to form a Ltd company in order to get paid. You can’t say no as you won’t have work. We have to have an accountant otherwise we would never make sense of any of it. All I know is some wages get put aside for tax and every 6 months we get an NI bill. I just hope it is right. Oh and I don’t know anyone in construction who has holiday pay or sick pay. If you don’t work you don’t have money coming in. So no paternity or maternity either.

MrsPear

I'm not sure what point you are making here with respect to the tax evading scheme?

MrsP, it is true that some people paying people like that insist they form a limited company. It happened to some BBC staff too. I am a sole trader (not incoporated).

This thread is not really about people like your husband however. He can lawfully form a limited company and then he might pay you and he dividends from it and a salary etc and they are subject to all the tax the law requires.

Instead the thread is about where people worked through an agency company (again perfectly lawful) but instead of being paid fees, dividends, wages they were given some kind of loan which was never repaid which meant they paid 15% tax instead of more like 30 - 47% tax which probably breached the law and now they are having to pay the tax they should have paid.

So, in some quarters, there is the insistence that the tax planning which is being targeted here was used by IT or financial high earners. However, an Early Day Motion, recently tabled in Parliament was worded thus “This House recognises that the (Loan) Charge will affect contractors, freelancers and agency workers, including social workers, supply teachers and bank and locum nurses and doctors; notes that employment was not an option and in some cases the company or organisation insisted on those arrangements, including to avoid paying National Insurance… believes it is unfair that HMRC are pursuing people who acted in good faith rather than the client organisations, agencies or umbrella companies all of whom benefited significantly; notes that HMRC are aggressively pursuing individuals…. with no independent right of appeal; further believes that the Charge is likely to cause financial distress and bankruptcies, and believes that retrospectively taxing something that was technically allowed at the time, is unfair”.

Whilst my protagonists in this thread assess my suggestions are “drivel”, I think it is a fair assessment that some of their suggestions are bull tulip!

Here's some stats from HMRC

"It is estimated that up to 50,000 individuals, or less than 0.2% of individual Income Tax payers in the UK, will be affected by the loan charge.

Based on the information available, 65% of those affected work in the business services sector. This includes professions such as management consultants and IT consultants. Ten per cent work in construction. Fewer than 3% work in medical services (doctors and nurses) and teaching.

Disguised remuneration schemes users, on average, earned twice as much as the average UK taxpayer. Seventy per cent of users have used these schemes for 2 years or more. Repeated use of disguised remuneration schemes will inevitably result in large tax liabilities."

That rather suggests that those of us saying these schemes were predominantly used by high earners in IT and similar areas,and that a relatively small proportion of teachers and medical personnel were involved were in fact fairly accurate.

A choice of phrasing in an early day motion does not make it a fact.

“This thread is not really about people like your husband however. He can lawfully form a limited company and then he might pay you and he dividends from it and a salary etc and they are subject to all the tax the law requires. ”

I would be very wary of this advice !

Here's some stats from HMRC

Hello HMRC!

I don't work for HMRC, but nice try.

“I don't work for HMRC, but nice try.”

So, is this a hobby for you and you conjure the stats from the internet?

If so, so can we all!

“A choice of phrasing in an early day motion does not make it a fact.”

But at least 100 MPs need to be convinced of it’s validity!

Why are you trying to spin in this into "HMRC persecuting nurses and bricklayers" when that's not what's happening?

*So, is this a hobby for you and you conjure the stats from the internet?

If so, so can we all!*

Yes, we can, if stats are available online then anyone can copy or refer to them, your point is?

Did you know the favourability rating of the Queen is 49%... does knowing that make me Her Maj now?

That early day motion is deliberately confusing when it says

"insisted on those arrangements". yes some of those using contractors insisted sole traders incorporate - the BBC did and others. There is a massive gulf between requiring that and requiring people use a dodgy loan scheme. The nurses etc could have gone to an agency which paid the full tax as loads of them did or they could go to a dodgy agency promising they would only pay 15% tax with the loan element. If they chose the latter course then the rest of us who have paid full time think it right and just they pay back that tax now.

I have seen no evidence that those paying the workers forced them to use the dodgy agencies with the loan schemes only.

So, is this a hobby for you and you conjure the stats from the internet?

Amazingly there are numerically literate people who don't work for the HMRC but can read ONS outputs.

You seem very invested in making this about low end workers, who frankly were not earning enough to make much out of these schemes.

The reality is the exploiters of these schemes knew what they were doing and were earning much more than the average Jill. They made a choice at avoid the taxes which paid for their roads, schools and hospitals.

Are you connected with the lobby group whose video you were promoting at the top? Or one of their paid up members (what is membership now, at one point I read it was running at 500ukp)?

I think it's an absolute disgrace that the government plunders peoples' earnings

I think it's an absolute disgrace that the government plunders peoples' earnings

Income tax is a disgrace?

Even I who support a very small state with much lower taxes ( I pay loads of tax) am not against enforcement of the law here against these dodgy 15% tax loan schemes.

“Why are you trying to spin in this into "HMRC persecuting nurses and bricklayers"

Not my intention matey! The spinning is being orchestrated by those who wish to make this “tax grab” and their objective is to characterise the morally repugnant tax evaders as the high earning sector to ensure that no public sympathy is generated towards the victims of this action.

I offer the following quote from Ian Dale who interviewed Stride about the Loan Charge:

“Thousands of self-employed people are being harassed by HMRC for thousands of pounds – in many cases tens of thousands of pounds. They took part in various HMRC approved schemes, which all of a sudden HMRC announced were illegal, despite having previously given them their blessing.

“So these people are being chased for back taxes for the last twenty years. This is affecting nurses, doctors, IT contractors and many other people too. These are not rich people. They are ordinary hard-working people whom through no fault of their own, have been caught up in something which should never have been allowed to happen.

“From what I know of the subject I cannot see how it is possible to defend HMRC’s action with any degree of logic. Fine, if there was an issue, introduce legislation to solve it, and ensure that people in future understand what the law is. But to penalise people for taking part in schemes which HMRC approved of and then try to claim back taxes over twenty years, well, I can’t see how a Conservative minister can defend that.“

I suggest, to those who have fallen for the line that the Loan Charge only impacts high earners who knew exactly what they were risking, that others are becoming aware that this is not true and that the whole thing stinks of HMRC complacency and inaction.

www.gov.uk/government/publications/hmrc-issue-briefing-disguised-remuneration-charge-on-loans/hmrc-issue-briefing-disguised-remuneration-charge-on-loans

Facts rather than spin.

This was not an HMRC approved tax scheme. This was fraud. There is a legal, ethical and moral difference.

Why on earth should anyone involved not pay at least the tax that would have been due?

Good night HMRC!