HMRC ‘don’t get caught out’ campaign targets bad tax advice: What are the risks?

HMRC’s ‘Tax Avoidance- Don’t Get Caught Out Campaign’ is a major scheme to warn workers about the dangers of artificial pay arrangements.

HMRC is aiming to steer individuals away from tax avoidance schemes and following financial advice from untrustworthy sources, like social media ‘finance influencers.’

If you’ve been paid through an umbrella company, loan or trust arrangement, it is important to check your tax position before HMRC contacts you first.

What does the campaign target?

As more people turn to social media for financial and tax tips, HMRC wants to ensure individuals aren’t caught out by bad advice.

The campaign predominantly targets flexible workers, contractors and the self-employed, who are considered the most susceptible to tax avoidance promotors.

This is achieved through teaching workers to recognise misleading financial tips and understand complex pay arrangements before they face large tax arrears.

In addition, there are links to reporting tax avoidance schemes and guidance on how to exit tax avoidance schemes.

The key warning signs highlighted by the campaign are:

• When something is too good to be true: Where there are promises of artificially high take home pay that look too good to be true, they often are
• Split payments: Salaries split into multiple parts, with some taxed normally by PAYE and the other treated as an untaxed ‘loan’ or ‘capital advance’
• False endorsements: Claims that schemes are officially approved, as HMRC never endorses tax schemes
• Extra contracts: Pressure exists to sign multiple agreements or side contracts

What are the risks to you?

As taxpayers have a legal responsibility for paying the correct Income Tax and National Insurance, tax avoidance schemes can lead to substantial tax bills, interest and penalties from HMRC.

Even if you were misled, you are liable for unpaid taxes and penalties.

Timing matters because penalties are often lower if unpaid tax is disclosed upfront, without HMRC having to open an investigation.

Waiting until an enquiry opens can make it seem as though you were hiding something, impacting how HMRC views behaviour.

In addition, sole traders and businesses are being publicly named and shamed on the Deliberate Tax Defaulter Lis.

Under powers granted by the Finance Act 2022, HMRC has been releasing the details of business owners involved in tax avoidance on publicly accessible registers.

The fallout of being caught up in a fraudulent scheme can extend beyond the tax bill, harming trust with customers and suppliers.

While HMRC’s campaign encourages anyone who suspects they are caught up in tax avoidance to contact them directly, this is not always advisable straight away.

Contacting without an adviser on your side can lead to you accidentally incriminating yourself or forfeiting voluntary disclosure protections, which can undermine your position.

Getting your approach right from the start can make a significant difference in how your circumstances are treated and how much it costs you.

Speak to a tax adviser

Finding out you have been caught up in tax avoidance can be unsettling, leaving many people feeling anxious and embarrassed.

It is important to not act impulsively, as rushing to contact HMRC or ignoring the problem can trap you in a position that is difficult to undo – getting specialist advice is the first sensible step.

Our tax advisers can help review how you’ve been paid, work out what you’re likely to owe and handle correspondence with HMRC.

We can draft disclosures to ensure your behaviour is fairly represented and penalties are minimised, exploring Time to Pay arrangements if a large bill is due.

Suspect you may have been involved in a tax avoidance scheme? Contact our advisers before you speak to HMRC.

You can get in touch with our friendly and experienced team on: 0203 675 8122 or email info@intaxltd.com.

inTAX is a specialist tax disputes firm. We deal with disclosures, investigations, and tax enquiries of all descriptions, including COP9, fraud investigations, VAT fraud, tax avoidance, let property disclosures and tribunal appeals. However, we don’t just deal with the serious end of tax investigations; we are also happy to handle smaller enquiries, disputes and problems that can be equally as worrying for our clients.