Tax avoidance schemes target NHS locums during Covid-19 crisis

On the 20th March 2020 BBC news reported that over 65,000 letters had been distributed to retired doctors, nurses and GP’s across the United Kingdom, urging them to return to work in order to help with the Covid-19 outbreak. These letters called out to locums, contractors and freelancers, who are specialists in their medical field. HM Revenue and Customs (HMRC) however have registered a warning to all National Health Service (NHS) workers as they are aggressively targeted by the ‘vipers’ of dodgy offshore or tax avoidance schemes.

Tax avoidance schemes have been around for many years. The likes of Gary Barlow and Jimmy Carr, to name a few, have been thrust into the spotlight having been caught by these schemes in the past. Some famous celebrities used Offshore accounts to avoid paying full UK tax rates. These are illegal and if caught, the culprit would be required to pay the entire tax amount backdated by HMRC.

All NHS workers should avoid signing up to anything relating to these schemes.

How can you identify these ‘dodgy’ tax schemes?

HMRC have published their latest report to warn workers of these schemes. The report titled ‘Spotlight 54’ (published 30th March 2020) lists the common traits to be aware of with these ‘snakes’, we summaries these points below:

They promote themselves as a regular Umbrella Company

These ‘umbrella companies’ targeting NHS contractors appear to be offering wages over two sets of payments.

1. Standard umbrella company payroll earnings, however, these will be processed around National Minimum wage levels or a flat rate payment (fully taxable).
2. Non-taxable payments that are described as a company shares, loans or some other non-taxable form.

Ultimately this scheme will aim to disguise the true level of earnings to avoid the payments required and tax expected. Payslips can have inaccurate earnings and can often showing incorrect deductions.

Professional and legitimate umbrella companies will have the following legal requirements:

• Fully audited and compliant records based on payroll.
• Full breakdown of weekly or monthly payments including tax payments, employer and employee NI.

They offer the ‘guarantee’ of higher take home pay

Many companies will offer lucrative packages such as 85% take home pay, payment via a loan, or no declaration of company expenses, all of which is illegal. UK tax laws and regulations must be adhered to, or you could be looking at personal financial consequences.

If this sounds too good to be true, it pretty much is. These types of packages lack transparency in exactly how they obtain the rate offered.

Asked to sign a document opposed to a ‘Contract of Employment’

A contract of employment is a standard documentation when contracting for a recruiter, umbrella company or end client. It will list the requirements of the role and how you will be subject to company expenses, PAYE tax and NICs. Schemes that require any forms to be signed stating shares, annuities or loan advances raise a red flag. Signing any of these could result in tax avoidance and see you paying backdated tax and interest missed.

Are there any other signs to consider?

When talking to any accountancy or umbrella company provider, always consider understanding the following when talking to them:

• How is your take home pay being calculated? Are you provided a detailed breakdown to show how the take home pay was done?
• What are the qualifications of the company supporting your tax needs? Are they fully MSC compliant?
• Are they a member of any professional body?
• What qualifications do the accountants hold?

If you are uncertain whether the company are not cohesive, then you can report them to HMRC here or speak to a member of our team on 0207 0962659 who can help support you with any inquiries.

Further information tax avoidance schemes, offshore schemes and Employee Benefit Trusts (EBT’s) can be found here: What is an offshore scheme, EBT and how to spot dodgy tax schemes?