Loan Schemes and Withheld Income

[cwcsolutions]

I reported the FCSA members who were under investigation to Julia Kermode, and the day ones that that I had noticed were loan scheme providers in disguise. All were associate members, i.e.blue logo, and in 1st October last year associate memberships were withdrawn; a bit too late for people who thought it meant something.

It’s difficult to name and shame, I’ve been threatened with defamation to make me back off when I warned the agencies using a particular company to save other agency workers who were unaware of the issue. I just copied HMRC investigators into my replies to the solicitor until they stopped harassing me, but I know from experience that no organisation will stick its neck out on this.

HMRC is quicker off the mark now, they’re already looking at schemes that operated in 2017/18 and are approaching users, so if there has been fraud perpetrated against the taxpayer by the so called umbrella company, perhaps people will get together to share the cost of action. However, next year HMRC is second preferential creditor in liquidations, so would a judgement even be necessary for employees, who are the preferential creditor? I’m not sure, it’s just musing on my part.

[webberg]

That LinkedIn post was me again, I’m on a roll!

I do think it’s an outright fraud, and am happy to chat, but this is what I have seen.

When I contact the umbrella companies and request they either make good the underpaid PAYE, or repay the worker, they have bribed workers by offering to file a tax return for free and give them a small payout. In spite of everything, it has been accepted by most, even though in my opinion, that’s just short term gain, long term pain.

Those who go forward with a claim can go the civil route, which is costly, or try the ET route, but two claims I’ve provided evidence for, have been shelved by the ET for over a year, with no explanation.

It’s hard to know what advice to give, but the starting place is to check whether this has actually happened, because of the potential defence when it comes to HMRC.

If this is correct then there is a case for the bodies authorising umbrellas (FCSA, PP, etc) and perhaps IPSE who claim a more general mandate to look after contractors, to "name and shame".

I'm not holding my breath on that one.

I agree that each user of such a scheme needs to do a very simple - follow the money - exercise in order to find out what is happening.

If the umbrella is reluctant to engage in that exercise, then that in itself tells a story and is a reason to leave.

[cwcsolutions]

That LinkedIn post was me again, I’m on a roll!

I do think it’s an outright fraud, and am happy to chat, but this is what I have seen.

When I contact the umbrella companies and request they either make good the underpaid PAYE, or repay the worker, they have bribed workers by offering to file a tax return for free and give them a small payout. In spite of everything, it has been accepted by most, even though in my opinion, that’s just short term gain, long term pain.

Those who go forward with a claim can go the civil route, which is costly, or try the ET route, but two claims I’ve provided evidence for, have been shelved by the ET for over a year, with no explanation.

It’s hard to know what advice to give, but the starting place is to check whether this has actually happened, because of the potential defence when it comes to HMRC.

[Fred Bloggs]

We have seen schemes in which the promoter claims to have made a deduction for tax (it appears as such on a payslip) but that has not been paid to HMRC.

That is not a scheme. That is outright fraud.

I understand the point around being careless but I guarantee that HMRC will be seeking penalties based on that regardless.

It would be good to have a chat soon?

Sure, it's fraud and other things too. But at the end of the day it's only the "employee" that's going to carry the can? Where does personal responsibility for individual tax payer duty start and end? HMRC aren't going to be chasing someone who has possibly embezzled millions of GBP to Panama, Belize, BVI or wherever, are they? What a mess this has truly become.

[webberg]

I wouldn’t choose to call these scheme providers, umbrella companies either, but that’s the point really.

Everyone that I have seen, thinks they’re what an umbrella company is, looks like a duck and quacks etc, but on the other hand, HMRC is sending letters demanding answers to questions about the loans provided, which can only lead to disaster for the individual, if they don’t understand the seriousness of the situation.

Also, a taxpayer can’t be treated as careless with their tax responsibilities if they’ve been hoodwinked into thinking everything is above board.

If 25% is deducted, but only a tiny proportion is paid over to HMRC, without understanding that they should check their personal tax account, how would they be expected to know?

I think it’s a defence which needs to be considered for people, who have not only been lead down a dead end and charged for it, but have suffered the theft of a proportion of their income too.

We have seen schemes in which the promoter claims to have made a deduction for tax (it appears as such on a payslip) but that has not been paid to HMRC.

That is not a scheme. That is outright fraud.

I understand the point around being careless but I guarantee that HMRC will be seeking penalties based on that regardless.

It would be good to have a chat soon?

[dammit chloe]

Being highlighted here.

https://www.linkedindotcom/feed/upda...6932125097984/ - Carolyn Walsh on LinkedIn: "Loan scheme providers - as if they haven’t done enough damage!

These odious people will not skulk away to some dark recess where they belong. Some are now offering schemes which help taxpayers to avoid the Loan Charge - Inducing people into avoiding the tax that has arisen on the use of a tax avoidance scheme, how depraved is that?

The most insidious of the lot are the loan scheme providers who having been caught, set up new schemes in 2016 onwards, which enabled them to withhold around 20% - 25% of each unfortunate user’s income, and;

1. this demonstrates that the provider exhibits a certain behavioural pattern when it comes to tax, and means they are under a constant HMRC scrutiny.
2. as the provider has moved into operating as an umbrella company, and as any ‘employees’ are largely ignorant of loan scheme providers, with 75% deductions looking like PAYE deductions, all are hoodwinked into thinking the company is above board.
3. when HMRC moves to close the scheme, the withheld amounts pay the loan scheme provider’s liability, leaving unsuspecting employees with an investigation and tax debts looming.

Remember Looney Tunes where the skunk, Pepe le Pew sets out to woo Penelope Pussycat by painting out his white stripe?

He was still a skunk.

#tax-avoidance
#loancharge

[cwcsolutions]

I wouldn’t choose to call these scheme providers, umbrella companies either, but that’s the point really.

Everyone that I have seen, thinks they’re what an umbrella company is, looks like a duck and quacks etc, but on the other hand, HMRC is sending letters demanding answers to questions about the loans provided, which can only lead to disaster for the individual, if they don’t understand the seriousness of the situation.

Also, a taxpayer can’t be treated as careless with their tax responsibilities if they’ve been hoodwinked into thinking everything is above board.

If 25% is deducted, but only a tiny proportion is paid over to HMRC, without understanding that they should check their personal tax account, how would they be expected to know?

I think it’s a defence which needs to be considered for people, who have not only been lead down a dead end and charged for it, but have suffered the theft of a proportion of their income too.

[Fred Bloggs]

Hi Carolyn -

Carolyn Walsh is an ex-HMRC officer with over 20 years experience in dealing with HMRC enquires and investigations, she specialises in helping people who are involved in tax enquiries relating to the IR35 legislation, tax avoidance schemes and issues relating to employment with umbrella companies.

[webberg]

Interesting information so thank you.

We would say that a firm operating a part pay/part loan scheme is NOT an umbrella. Rather they are selling tax avoidance.

To go beyond that and retain money (for what reason?) seems to be either:

1. a prudent move in case more tax is demanded and they can pay it
2. some form of avoidance based on deferement/timing
3. theft

We have information on perhaps 150+ schemes now but none of them operate this way. Perhaps as we start to see HMRC enquiries for later periods, they will pop up.

[cojak]

Thanks for this.

(I'm proud of you IH... )

[Invisiblehand]

Some umbrella companies which pay on a part salary, part loan basis, operated a scheme which allowed them to withhold 20%-25% of contractors’ income.

HMRC investigators are aware that this is happening, but won’t get involved, but it does have a bearing on whether penalties are attached to any tax debt that may arise.

Check what you were paid, what was reported and what was received by the umbrella company from the agency, and you may find a sum missing, which is not included in the payslip or reconciliation statements you may have received.

Thanks for this.

[cwcsolutions]

Some umbrella companies which pay on a part salary, part loan basis, operated a scheme which allowed them to withhold 20%-25% of contractors’ income.

HMRC investigators are aware that this is happening, but won’t get involved, but it does have a bearing on whether penalties are attached to any tax debt that may arise.

Check what you were paid, what was reported and what was received by the umbrella company from the agency, and you may find a sum missing, which is not included in the payslip or reconciliation statements you may have received.