Reply to: HMRC turning a blind eye to FRAUD

[LondonManc]

You'd think someone at HMRC might have queried WTF this UK company was up to.

1. In 2007, UK-FC turned over £59m yet only had 6 staff including directors!
2. Of that £59m coming in, £57m left the company headed for the IoM.
3. UK-FC was a wholly owned subsidiary of an IoM company

But now some compliance officer at HMRC says it wouldn't be "appropriate" for UK-FC to have to comply with the PAYE regulations.

What a joke.

I'd happily pay normal tax on my sixth of £59m revenue. Take £5m of costs for the company out and you're still in a very happy place.

[DealorNoDeal]

Which scheme was this?

[lowpaidworker]

You'd think someone at HMRC might have queried WTF this UK company was up to.

1. In 2007, UK-FC turned over £59m yet only had 6 staff including directors!
2. Of that £59m coming in, £57m left the company headed for the IoM.
3. UK-FC was a wholly owned subsidiary of an IoM company

But now some compliance officer at HMRC says it wouldn't be "appropriate" for UK-FC to have to comply with the PAYE regulations.

What a joke.

£59m - £57m = £2m to line the six employees pockets.

Nice little earner for processing invoices.

kind of get why these schemes were so aggressively marketed and sold

[More Lamb]

You'd think someone at HMRC might have queried WTF this UK company was up to.

1. In 2007, UK-FC turned over £59m yet only had 6 staff including directors!
2. Of that £59m coming in, £57m left the company headed for the IoM.
3. UK-FC was a wholly owned subsidiary of an IoM company

But now some compliance officer at HMRC says it wouldn't be "appropriate" for UK-FC to have to comply with the PAYE regulations.

What a joke.

[DealorNoDeal]

What about a UK agency which only ever supplied self-employed workers, and a few thousand of them over several years? What would you normally expect HMRC to do about that?

If HMRC had been aware of it at the time it was happening, you'd think they would have investigated the agency. Supplying thousands of (high earning) self-employed workers is clearly taking the piss, even if it's not illegal.

If they only found out about it years after the fact, I can see why it suits them to disregard it. The chances of collecting the PAYE from the company now are presumably zilch. Much easier to go after YOU for the money!

[NotAllThere]

What would you normally expect HMRC to do about that?

Depends whether a loan scheme was involved or not. But I'm not HMRC and I'm not playing devils advocate.

[More Lamb]

The agency law does not prohibit supply of self-employed workers. It just puts the liability for unpaid taxes on the agency if the worker turns out to not be self-employed after all.

Thanks, that is helpful.

What about a UK agency which only ever supplied self-employed workers, and a few thousand of them over several years? What would you normally expect HMRC to do about that?

Because this case involves tax avoidance, maybe it's ok for HMRC to use their discretion and let UK-FC off the hook and put the liability on the workers?

[NotAllThere]

The agency laws prohibit the supply of self-employed workers, unless they are 100% genuinely self-employed. Very few workers meet this criteria, and certainly not your average IT contractor.

The agency law does not prohibit supply of self-employed workers. It just puts the liability for unpaid taxes on the agency if the worker turns out to not be self-employed after all.

Not surprisingly this meant agencies won't work generally with the self-employed, hence the rise of the ltd.co. contractor. It also explains the nature of IR35 - it's a (un)natural progression from the agency law. "If the ltd.co. wasn't there, would the worker be an employee?".

[More Lamb]

How is this fraud?

What's illegal about a UK company supplying self-employed workers?

Exactly what law(s) have been broken?

A UK company which supplies workers to other companies is treated as an 'agency', and is covered by the agency laws.

The agency laws prohibit the supply of self-employed workers, unless they are 100% genuinely self-employed. Very few workers meet this criteria, and certainly not your average IT contractor.

Now, if an agency did this with the odd one or two self-employed workers then that might be forgivable. It could be put down to carelessness.

UK-FC did this on an industrial scale with thousands of self-employed workers. That is FRAUD, and HMRC are choosing to turn a blind eye to it.

[piebaps]

Sorry Simon but that holds no water.

The UK and IOM have a reciprocal agreement for NIC. It dates back to 1948 and basically says that the two territories are treated as one for NIC purposes. Isle of Man Government - Reciprocal Agreement with the UK

If NIC was due in the UK from an IOM based employer then the IOM authorities can enforce collection on behalf of HMRC and have done so, quite recently in relation to the Penfolds scheme.

Isle of Man Judgments Online

[SimonMac]

HMRC are even disregarding PAYE where:

• An IoM scheme had a UK front company (UK-FC)
• UK-FC was supplying thousands of UK resident self-employed sole traders, to businesses in the UK, on behalf of IoM companies
• UK-FC was run by the same family which ran the IoM companies
• UK-FC evaded £millions in Employer NI contributions alone

HMRC are fully aware of all of this but prefer to look the other way.

This is what you're up against folks!

Because IoM scheme might be out of jurisdiction of HMRC and have much better lawyers than your average jobbing contractor?

[DealorNoDeal]

How is this fraud?

What's illegal about a UK company supplying self-employed workers?

Exactly what law(s) have been broken?

[lowpaidworker]

UK-FC broke the law and defrauded the Exchequer.

HMRC have chosen to disregard this and transfer the liability to the workers instead. They've given UK-FC a free pass.

OK see what you mean. This has always been known right. HMRC have never actually challenged any scheme providers until recently (if you care to believe HMRC on this... I still dont) but just mopped up the poor old users. I see a rather fabulous tweet by Keith Gordon on something similar today.

[More Lamb]

sorry for my bad but...

what do you mean by disregarding PAYE and look the other way

UK-FC broke the law and defrauded the Exchequer.

HMRC have chosen to disregard this and transfer the liability to the workers instead. They've given UK-FC a free pass.

[lowpaidworker]

HMRC are even disregarding PAYE where:

• An IoM scheme had a UK front company (UK-FC)
• UK-FC was supplying thousands of UK resident self-employed sole traders, to businesses in the UK, on behalf of IoM companies
• UK-FC was run by the same family which ran the IoM companies
• UK-FC evaded £millions in Employer NI contributions alone

HMRC are fully aware of all of this but prefer to look the other way.

This is what you're up against folks!

sorry for my bad but...

what do you mean by disregarding PAYE and look the other way