Government urged to act after four more tax avoidance schemes identified – London Business News | London Wallet

HMRC has added four more tax avoidance schemes to its list of known avoidance promoters. The update, issued on 5 September, should be welcomed – but instead, it raises questions about HMRC’s anti-avoidance strategy.

This is according to Qdos, a tax compliance expert and insurance provider. While a growing number of avoidance schemes are identified, thousands of contractors and freelancers remain exposed to non-compliance risks.

The explosion in tax avoidance schemes identified in recent years – HMRC’s list began in 2022, and there are around 100 identified schemes – which indicates a growing issue, driven by the introduction of the off-payroll working rules (‘IR35 reform’) and a lack of umbrella regulation.

While previous governments have attempted to recover tax revenues lost to avoidance schemes through controversial methods, such as the Loan Charge, Qdos believes an urgent change in strategy is needed.

This includes introducing regulation of the umbrella sector, and holding scheme operators to account, as well as ensuring that flexible workers and other vulnerable self-employed workers are better protected against exploitative practices.

Commenting, Qdos CEO, Seb Maley said, “On the face of it, the identification of four more avoidance schemes is good news – one less tax non-compliant umbrella company in existence the better. But dig deeper, and the fact that around 100 have been identified highlights the extent of the problem.

“A failure to regulate the umbrella sector over the last decade, in combination with IR35 reform, has precipitated a huge increase in tax non-compliance.

“The off-payroll rules have needlessly put some businesses off engaging genuine contractors, for fear of getting their IR35 status wrong. As a result, demand for umbrella companies has skyrocketed – and shifty operators have flooded the marketplace to meet it.

“A serious change of strategy is desperately needed. The new government must follow up on the previous administration’s consultation on umbrella sector regulation with action. Flexible workers have been exposed to these compliance risks for too long, and a solution is well overdue.

“Labour’s electoral campaign focussed on ending exploitative work practices, and that’s exactly what this is. Some delayed justice for those affected by the Loan Charge scandal would also be welcome.”