Public sector nurses and social workers who have been encouraged by recruitment agencies to take their wages through suspected tax avoidance schemes are now in debt of tens of thousands of pounds following HMRC investigations.
Employment agencies have been taking business from rivals by allowing workers to be paid through umbrella companies offering between an 80-90% take home pay.
These tax schemes, which are usually registered in places like the Isle of Man or Malta, attract workers due to the net pay offered by taking payments from local authorities on their behalf and then paying the worker back in the form of a ‘loan’. A loan which is never paid back.
HMRC is pursuing up to 100,000 contractors who used “disguised remuneration” schemes and other methods of tax avoidance in the 2000’s — with 40% of such contractors facing bills that are driving them to the point of bankruptcy.
These schemes are still being permitted by recruitment agencies all over the country with thousands of social workers and locum nurses among their customers.
A recruitment agency based in London and Luton, believed to have hundreds of social workers and locum nurses on its books, permitted its contractors to have their affairs managed by one of these schemes which HMRC suspects is a tax-avoidance scheme.
Workers using the scheme have reported receiving warning letters from HMRC. The letter tells them “to complete your tax return to show any loans you have received as earnings” and settle their tax bills, which often amount to tens of thousands of pounds.
Aside from the hefty fines to contractors, agencies are also at risk due to transfer of debt, penalties and run the risk of commercial damage.
Here at ePayMe we have been advising contractors of these schemes for some time now and providing guidance and support to agencies to create a robust and compliant process, which does not leave them or their contractors at risk.
To find out how ePayMe can support your business call us today on 01252 863 700.