HMRC has recently put a stop to the latest tax avoidance scheme marketed by the notorious NT Advisors. What really gets my goat is that this wasn’t the first wrap on the knuckles for NT…can you believe they’ve had three previous schemes given the boot by HMRC due to failures in tax compliance!
This latest scheme is so far “out there” that it beggars belief; the “Working Wheels” scheme ran from 2006-2008 and included about 450 high-net worth individuals who – in order to make the scheme work – had to claim that they were involved in the second-hand car trade (yeah right…because most high-flyers in the worlds of finance and show-business genuinely can’t make ends-meet without following in the used-car-salesman footsteps of Arthur Daley!).
Unsurprisingly, the tribunal found the scheme to be “highly artificial” with a series of convoluted steps involved to make it look “as though by magic” that members had incurred vast fees in order to borrow modest amounts of money to enable them to invest in the second-hand car trade. In reality, of course, the scheme users had no genuine interest or involvement in the used-car trade.
Commenting on the case, David Gauke, the Exchequer secretary, said:
“This case is another example of why taxpayers should not fall for the promises of promoters selling schemes that are all too often too good to be true. Not only will the taxpayer waste money on the fees for these failed schemes, they will still have to pay all the tax, interest and penalties that are due”.
HMRC have claimed that the closure of the scheme has saved the country in the region of £290 million. One of the schemes better known members, former BBC Radio 1 DJ Chris Moyes, personally stood to avoid up to £1 million in taxes through the scheme.
In closing the case, HMRC commented, somewhat ominously, that its anti-avoidance rules meant that “anyone using an avoidance scheme is playing with fire”.
Whilst NT Advisors do not specifically market their schemes to contractors or freelancers – thereby posing little direct concern for recruitment agency compliance – they give a good indicator of the lengths that tax avoidance providers will go to in order to create avoidance solutions.
Recruitment agencies are therefore encouraged to carry out extensive due diligence in order to ensure agency compliance. To mitigate recruitment agency risk, agencies are advised to only work with umbrella company contractors and limited company contractors.