To think it's fair these tax avoiders pay the tax that's due?

[SuzzieWithEthics]

This scheme was dodgy from the start but lots of NHS and it contractors used it for years. Now face having a bill for hundreds of thousands. But all that's due is the tax they avoided. So it's all fair right?

www.theguardian.com/money/2019/feb/16/thousands-of-workers-hit-with-massive-tax-avoidance-bills?CMP=Share_iOSApp_Other

For goodness sake, these aren't poor little naive people who've been exploited.

The high earners in this article are not. No excuses for them.

Some companies set this up for everyone, so they could pay shit wages but still recruit and the company can charge for this 'service'.

I think for people on minimum wage where this was a condition of employment they should pay half - they still should have known but the real culprits are the people who ran the schemes. Most of them will suffer no consequences.

Now, if this actually was a salary, as many of posters think - should not the employer also be on the hook then for decades of holiday pay and pensions?

Absolutely! The companies in charge of this scheme seem to have done the best out of this! Sounds like they took the individuals pay, took out a 20%ish whack for a fee, and then left the individuals without a paddle.

The individuals end up paying almost the same deductions as tax would have been, and now liable for that tax anyway.

The companies managed to siphon off 20% of people’s income, which should have been paid in tax, but went to their shareholders instead. We should be furious with them.

I didn't know this was happening- did yhey recover the tax from BBC "stars" in the end? I assume this is similar?

Another IT worker said his estimated bill is £300,000.

but a simple example would be this. Let’s say the IT worker is hired for £3,000 worth of work. They are advised by their accountant to use an employee benefit trust (EBT), usually set up by a specialist company. The £3,000 is paid not to the IT worker but to the EBT, which then pays it back to them in the form of a loan, after some deductions for their fees. There is no tax paid on the £3,000, and the idea is that there is a mutual understanding that the loan will never be repaid. This is why HMRC calls it “disguised remuneration”. It’s also why many PAYE workers will have limited sympathy for the people receiving bills now, arguing that they were evidently sidestepping income tax.

I’m trying to work out what sort of salaries these people had, that the tax they owe comes to £400,000.
The HMRC calculates all income from often 10 - 20 years of employment to be "earned" in the current year, thus most of it will fall into the additional tax bracket.
But still, that's a hell of a lot of tax to be paid, how much must they have earned to need to pay that much tax, I don't have much sympathy

But still, that's a hell of a lot of tax to be paid, how much must they have earned to need to pay that much tax, I don't have much sympathy
As a rough calculation, about 800K gross in total - over 20 years it would be around 40K a year (say, a senior nurse) - with no pensions, holidays, job security or employment protection, it actually is not a very posh lifestyle. Remember that administration fees were still paid from that income.

The individuals end up paying almost the same deductions as tax would have been, and now liable for that tax anyway.
Well, even worse - the payment of the HMRC tax does not take them off the hook for the original loan arrangement (as this was entered into with a private company). The loan was not "non-repayable" as there is no such thing - the arrangement (as I could understand it) was that the loan was backed by the equity in the trust fund itself as a collateral (so that if the scheme ever calls on the loan repayment, the contractor could call upon their equity to meet this obligation, and is therefore "protected"). Now many of these schemes were closed / transferred / re-opened under different names and with different owners, and the equity in the original arrangement does not exist anymore. The person I am speaking of actually is not scared so much about the HMRC tax - in her case it is not that high, she wasn't a high earner - but because she had suddenly discovered that she owes her earnings for 10+ years to an offshore company she never heard of, and that she can call upon her share in the original dissolved trust to pay for that.

didn't know this was happening- did yhey recover the tax from BBC "stars" in the end? I assume this is similar?

They did from Chris Moyles and similar that were involved in the car sales schemes.

Alarm bells would have been ringing for anyone joining these things. They were all to happy to gloat when they thought they got away with it. Now they have to pay the fair amount of tax it's a different story.

This thread on the subject from last year www.mumsnet.com/Talk/am_i_being_unreasonable/3376534-HMRC-are-going-to-tax-agency-workers-back-20-years

No rules have changed. All that is different is that HMRC are challenging the claim that a loan with be 0 percent interest and no maturity date is in fact a loan at all. The people involved were high earners, well aware that they were not paying the tax they should. These were not innocent minimum wage workers. HMRC have been very clear here, unlike the spin campaign.

So they thought it was normal to not have to pay tax?

Yeah lacking sympathy. They aren't that stupid, they were greedy. Sounds like they are just going to claim bankruptcy to avoiding paying it too, so it won't get paid back.

As a rough calculation, about 800K gross in total - over 20 years it would be around 40K a year

That's assuming they were in it for 20 years and even if they were 40k a year 20 years ago was alot.

Many have been earning high 6 figures on this and getting away with little tax and being smug about it.

Agree the spin capagin is the ones being misleading.

Having worked for an organisation which encouraged people towards Umbrella companies for contracting work (after the time period where this particular scheme was in operation, but when others which could be considered tax avoidance still operated), I am completely on the side of the workers. Imagine a scenario where you sign up with a temp agency for a ‘higher level’ role - anything paying more than about £25 ph really - and rather than being employed PAYE by the agency, they tell you if you talk to this umbrella company who can increase your take home. You are told everything is legal, it gets explained briefly, and the agency say they will only use you if you use the Umbrella, or your own limited company. They won’t work with you if you are simply self employed because the tax liability is unclear, and could sit with the agency or their end client which isn’t acceptable. They don’t tell you that the agency gets a ‘processing fee’ from the umbrella for every timesheet you submit, and that the agency keeps the employers NI it would have paid if it employed you which makes you considerably more profitable to them.

The system has been corrupted for a very long time, and the corporate profit made by agency and umbrella and the reduction in risk and outlay for the client far exceed any personal gain made by the contractor themeselves.

Yes personal responsibility plays a part, and I wouldn’t be paid that way myself even at the time. But the apportioning I’d blame is incorrect here.

(I left the whole recruitment industry over this issue, it was morally corrupt four years ago even after the changes to public sector contractors. Disguised employment all over the place)

The people who new these schemes were a gamble that in the future would be retrospectively chased far outnumber the minimum wage employees forced into it.

It's typical spin now it's being called in to use the most extreme emotional argument, if not shift blame or focus by talking about Football clubs, celebrity's or multi national.

I don’t think it’s right. They should have investigated promptly instead of making ridiculous demands retrospectively.

Totally agree just another. Lots of misleading spin from the people that don't want to pay tax.

Suzzie - do you think the blame lies 100% with contractors? Or is it, at the very least, shared with employers and massive trust funds who facilitated these schemes?
I worked with contractors for many years (and was one for some time too, thankfully never used the scheme discussed), I haven't heard any of them gloating about not paying any tax. Even a highly qualified IT contractor on six digits just does not have a capacity to set up a complex offshore scheme like this independently. It was offered to everyone at that time (actually, marketed very aggressively). If you read the article, one of the interviewed contractors had actually worked for the HMRC itself under this scheme.
I hope that everyone on PAYE does an independent re-calculation of what their employer paid for them in tax every year, spending weeks and weeks studying the tax code - especially in more grey areas such as "car allowances" for workers without cars, "mortgage subsidy" for workers without mortgages etc.

It's not a question of fault. The correct fax was not paid so if needs to be. That is all HMRC are doing.

No-one be seems to be claiming these loan schemes were genuine loans. They were not. Everyone involved had to file a tax return stating their income. At this point they lied. Whatever they were told by the scheme is immaterial. They lied to HMRC about their income and are now being asked to pay. It really is that black and white.

Everyone involved had to file a tax return stating their income. At this point they lied.
It was a packaged scheme, one that prepares the annual tax return for the employees, signed by a qualified accountant (and there was a PAYE component there too, not all went as "loans"). People saw a difference of around 20%-25% between their contracted rates and net pay from the umbrella company and did not think twice. That might have been stupid or careless, but certainly not evil.

That might have been stupid or careless, but certainly not evil

Don't think anyone is seriously calling it evil, but a large majority who signed up to these schemes where well aware it was a grey area, it was a well know gamble that hasn't paid of, it's good that HMRC have closed the loophole (whilst also going after others)

In order to complete my tax return, I have to give details from my annual P60, which in the past was supplied by my employer and now my pension company, any other income I earned, through also being self employed, also has to be declared.
Did none of these people receive their P60s? Or declare their earnings at the time?

I think that people have huge double standards over tax.

Many go on about how it is a moral duty to pay tax whilst religiously topping up their ISAs every year. Then they try to make a distinction between ‘evil’ tax avoiding companies and individuals just using the tax breaks available to them.

Agree it's not even about blame. People earnt money and didn't pay tax on it, HMRC say it's due.

It's like bingo on these threads; amazon, Google and ISAs because having an ISA is so comparable to lying about your income and using a very dodgy scheme that there's been warnings about for years.

Always trying to find someone else to blame and not take personal responsibility.

Then they try to make a distinction between ‘evil’ tax avoiding companies and individuals just using the tax breaks available to them.

Comparing ISA's to known grey areas of minimising tax is disingenuous.

It was a gamble that didn't pay off, nothing more.

The real double standards is pretending this came out of the blue, everyone thought is was all above board and exaggerating the effect on minimum wage employees for emotional effect to try and garner wider support.

Not just ISAs but cramming pensions too. This kind of retrospective action when even HMRC paid contractors through these companies is just plain wrong and unjust.

I have a colleague who's understanding of tax and NI is so poor that I have had to explain her payslip to her as if she was a child. She worked very briefly through a similar scheme and owes some money (not much though, it was very brief and at a sub £30k pay rate). She genuinely did not know there was any problem. She's shown me the email she has requiring her to be paid in this way and assuring her of the legality. You can make a good argument that we should make sure for ourselves that we understand tax and are fully compliant, but honestly, a lot of people genuinely will not have understood that they were avoiding what they owed.

Not just ISAs but cramming pensions too

Pensions are not the same at all.