Is HMRC’s Name and Shame List Really a Deterrent?

The HMRC list of named tax avoidance schemes has been trucking along steadily, and now features over 30 named companies. 

The list, designed to deter tax avoidance schemes and promoters of tax avoidance schemes, and protect contractors from unknowingly falling victim to tax avoidance, has been in place for over a year now, and has been largely welcomed by the umbrella industry. 

But Julia Kermode, founder of iWork has recently criticised the initiative, having previously been in full support. 

In this article, we look at a flaw in the system which Julia has said makes the list “a farce”.

Julia Kermode has recently come out to publicly criticise HMRC’s tax avoidance list, having previously supported the initiative.

The list is a public record of tax avoidance schemes and their promoters. Most on the list are non-compliant umbrella companies, who lure contractors by promising low rates of tax and a higher take home pay. Also on the list are promoters of tax avoidance schemes.

There are several ways that the schemes work, but they all result in contractors not paying the right amount of tax, and therefore left with a huge tax bill and in the worst cases, fines. 

Unregulated industry

The umbrella industry is currently unregulated, and compliant umbrella companies have long been calling for a change. Legislation would make it much more difficult for non-compliant umbrellas who are failing to act in the best interests of the contractors to continue to operate, while allowing legitimate umbrella companies to provide valuable services to contractors. 

As it stands, most compliant umbrella companies (like Ship Shape), choose to get FCSA accreditation, and can also work with other compliance, recruitment, and HR organisations such as Professional Passport and iWork. This all helps to create and maintain high standards across the industry and demonstrate a commitment to a transparent and compliant service. 

Single Enforcement Body

The government has been suggesting the creation of a new single enforcement body to regulate the entire employment industry and help ensure compliance in the labour market. But despite it regularly appearing in the news headlines, recent reports suggest that the SEB is still at least three years away.

HMRC List – a bit of hope

The HMRC tax avoidance scheme list therefore represented a bit of hope that the government were taking the struggles of the umbrella industry seriously and provided somewhat of a deterrent for non-compliant umbrellas.

But having just had its first anniversary, Julia Kermode has pointed out a huge flaw in the system. 

Non-compliant umbrella companies will only appear on the list for 12 months, before being removed (this time limit is a requirement of the Finance Act).

In short, this means that dodgy umbrella companies, and their promoters, can go straight back to full operation after a mere 12-month hiatus while on the list. In the recent iWork newsletter, Julia goes on to say that “HMRC’s list will never be comprehensive and therefore never be useful no matter how many schemes are added, because there will always be a continual cycle of old ones being removed.”

Having been in support of the list previously, Julia Kermode has now withdrawn her backing, pointing out that it can’t be effective in the long-term.

As a fully compliant umbrella company, we at Ship Shape continue to support the call for regulation of the industry. We provide an extremely useful service to contractors who need continuity of employer and ongoing payroll support. If you have any questions at all don’t hesitate to get in touch.