HMRC planning to clamp down

HMRC planning to clamp down

HMRC is continuing to clamp down on the use and promotion of tax avoidance models which are still rife in the contracting industry.

One of the biggest challenges to the contracting sector has been knowing or identifying which payroll services are compliant with tax legislation.  HMRC have been criticised for allowing the sector to ‘mark its own home work’ for too long and as a result it has led to uncertainty about what payroll vehicles are compliant and allowed.

Many thought that HMRC missed a trick in this years budget by not taking more of a stance on tax-avoidance and introducing a team dedicated to patrolling the sector.  Well it appears HMRC have taken a step in the right direction by introducing their latest tool.  The new tool will allow contractors to answer a few relatively simple questions about how their current umbrella operates.  Depending on how the contractor answers those questions they will be given a verdict from HMRC whether or not they believe the contractor has involved themselves in a tax avoidance model. 

You can view the tool here:

Critics will say that this alone is not enough in tackling the whole tax avoidance problem, and that contractors should not be the ones to have to determine if the model is compliant or not, but perhaps it is a start and forces contractors to think about what they are agreeing to, rather than just thinking ‘who will pay me the most’. 

The key as always, is education and awareness.  Educating the contractors so they know how an Umbrella company should work, and raising awareness so that employment agencies and businesses can identify the red flags and advise their contractors to avoid certain schemes and ultimately stop them from engaging with them at source. 

i4 welcomes the new tool, as we have long championed for a clean-up of the sector, and hope it is the start of improved engagement from HMRC in the sector.

As always, if you want to have a chat about how i4’s umbrella service operates and what separates us from tax avoidance models, please call our helpful sales team on 0203 603 1290 or email us at