This is a serious warning to those NHS workers that are returning to work during this COVID-19 pandemic.
Firstly, thank you.
Crisis has brought out the best in you. And we all benefit.
Secondly, please be careful. We know you have limited time and energy, but it’s really important that you avoid getting caught up in a tax avoidance scheme. Crisis has brought out the worst in these people. And you are at risk.
Our tax and accountancy services have supported Nurses and other healthcare professionals since 2002 and always help when we can.
What NHS tax avoidance scheme?
There are many different tax avoidance schemes, the perpetrators adapt to new opportunities very quickly. HMRC continually investigate and prosecute both the people organising such schemes and the individuals who use them.
The common denominator is that they are offered as an alternative way of being paid, which saves money on your tax bill. The idea is to disguise your earnings from income as a different sort of transaction, so that they avoid the usual income tax and National Insurance Contribution (NICs) payments.
The new element to this one has been carefully tweaked to appeal to taxpayers returning to work in the NHS, in response to the government’s plea for help.
An umbrella company creates a variety of these schemes and you receive your salary in two payments. The first payment is smaller, a flat rate amount or minimum wage. And this is paid to you through the payroll department of the umbrella company as ‘earnings’.
The second payment is redefined as shares, annuity, loan, capital advance or a line of credit – which are non taxable payments.
Legally, these types of transactions are all non taxable. And you are saved money on your UK income tax and NICs bill. But this doesn’t mean that the actual money is non-taxable because it is, in essence earnings.
How do they convince people to sign up?
They sound great, are presented convincingly and are just vague enough about the details. Schemes will make sure that you take home 80-85% of your pay. Who doesn’t want that? Or will ‘ensure that you’re using your Personal Allowance more efficiently’. Sounds like a good idea, doesn’t it?
They will not be presented to you as a way to avoid paying tax. Obviously, that would set alarm bells ringing.
Companies may also try to sound legitimate by telling you they have an HMRC Scheme Reference Number (SRN). They may well have an SRN, but this is not an endorsement. HMRC give SRNs to companies that they are investigating as a suspected tax avoidance scheme. The opposite of approval.
What will they ask me to sign?
Your signature will be required on paperwork that is in addition to your employment contract. You cannot be part of a scheme like this without signing up to it. A signature is required in order to receive all the different types of payments listed above.
Tax avoidance scheme paperwork often only shows details of the first payment, perhaps with some tax deductions that aren’t right. This makes your payslips deliberately confusing.
But once you have signed, you are legally culpable for participating in a tax avoidance scheme. Whether you understood that at the time of signing, or not. This leads to owing HMRC the tax you didn’t pay on your earnings, plus interest and probably a penalty. In a worst case scenario, you could be facing charges of tax avoidance.
I think I’ve already signed up to something like this
Don’t panic. Just leave the scheme as soon as you can and sort out your tax position with HMRC. It is so much better if you initiate contact and explain.
HMRC’s contact email for such situations is: [email protected].
I know these schemes are being offered where I work
If you are personally offered a similar payment set up, you can check its legitimacy by asking some key questions. Work out how much tax and NICs you should be paying on your salary, then ask how much the deductions for income tax and NICs are. Are the two figures closely similar? If not, then you’re probably looking at a scheme designed to avoid tax. You should also ask for a breakdown of what the company’s fees are for.
Even if you haven’t been offered something like this yourself, if you hear about such schemes being promoted at your workplace you can report them to HMRC’s fraud team for investigation.
Please don’t get caught out
We know you’re in a hurry to get back into work to support your colleagues and care for your patients. And we also know that your focus is not on making money. It’s easy to be rushed into things when your thoughts and emotions are elsewhere. Just being aware that you are being deliberately targeted by criminals in this way is a great way to keep yourself safe. If it doesn’t feel quite right, don’t sign anything until you’ve checked it out fully.
