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HMRC accused of hiring contractors who were using tax avoidance schemes

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HMRC accused of hiring contractors who were using tax avoidance schemes

According to a report released last week, HMRC has been accused of holding important information back from a parliamentary committee. The accusation is in relation to the controversial Loan Charge (2016) – legislation targeting contractors and freelancers who have engaged with ‘disguised remuneration’ schemes (tax avoidance schemes).

An all-party group of MPs and peers has accused HMRC of protecting its reputation rather than being transparent. The claims relate to the Loan Charge – legislation unveiled in 2016 designed to recuperate underpaid tax from contractors and freelancers who have engaged with tax avoidance schemes (also referred to as disguised remuneration schemes).

Many groups and stakeholders frequently challenge the Loan Charge because it has landed people with life-changing penalties – even though they may have underpaid tax by mistake. Some workers (including nurses) are believed to have been pointed in the direction of wicked payroll schemes by third-parties they put their trust in.

The All-Party Parliamentary Loan Charge Group consists of several MPs and peers who are worried about the Loan Charge and its impact on those who are deemed to have used disguised remuneration schemes. The group, funded by the Loan Charge Action Group campaign, has released information that may be considered embarrassing for HMRC.

The report stated:

“It is clear there were indeed contractors working for HMRC, as well as government departments, using loan arrangements. The fact that HMRC has tried to evade questions on this matter is disgraceful and, we believe, a clear attempt to seek to cover up this embarrassing fact.”

It also detailed:

“The whole farce of the loan charge fiasco is surely demonstrated no more powerfully than by the fact that HMRC itself was using contractors engaged on what they now claim to be ‘aggressive’ and ‘defective’ tax avoidance arrangements. As well as not acting at the time to close these down, it also follows that HMRC was therefore also embroiled in such tax avoidance arrangements.”

HMRC has been questioned about whether any of its workers have done or are currently using disguised remuneration schemes. They refused to answer – even ignoring queries from the House of Lords economic affairs committee.

Suppose members of HMRC’s staff are using disguised remuneration schemes. In that case, it could represent a lack of care for their workers’ wellbeing, or it may prove how easy it is for honest workers to engage with unethical tax avoidance schemes accidentally.

spokesperson on behalf of HMRC said:

“HMRC senior leaders did not mislead members of the House of Lords, and we have never endorsed or participated in disguised remuneration tax avoidance schemes. It is possible for contractors to use disguised remuneration without the participation or knowledge of their engager. Whenever it is or has been discovered that a contractor providing services to HMRC or RCDTS is currently using a disguised remuneration scheme, we have acted and will act promptly to terminate the relevant engagements.”

They added:

“We continue to warn people about the risks of using tax avoidance schemes, and our advice remains the same – if something looks too good to be true, it almost certainly is.”

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