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Tax avoidance schemes: how to know if you’ve been targeted

HMRC warns of the hidden costs and penalties for agency nurses and other healthcare workers

HMRC warns of the hidden costs and penalties for agency nurses and other healthcare workers

Unscrupulous promoters of tax avoidance schemes are continuing to target healthcare workers, including agency nurses and those who have returned to help the NHS during the COVID-19 pandemic.

There can be significant financial implications for anyone involved in these schemes.

Schemes can be tempting but they carry hidden costs

A HM Revenue and Customs (HMRC) report shows that healthcare workers are often targeted and drawn into schemes marketed by companies promising higher take-home pay and less admin.

Yet most of these schemes do not work

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HMRC warns of the hidden costs and penalties for agency nurses and other healthcare workers

A woman sitting on a safo rading a tax statement. Tax avoidance schemes can leave you with large tax bills and penalties
Tax avoidance schemes can leave you with large tax bills and penalties Picture: iStock

Unscrupulous promoters of tax avoidance schemes are continuing to target healthcare workers, including agency nurses and those who have returned to help the NHS during the COVID-19 pandemic.

There can be significant financial implications for anyone involved in these schemes.

Schemes can be tempting but they carry hidden costs

A HM Revenue and Customs (HMRC) report shows that healthcare workers are often targeted and drawn into schemes marketed by companies promising higher take-home pay and less admin.

Yet most of these schemes do not work and those who sign up to them are left to deal with the consequences, including higher tax bills, interest and a potential penalty.

That is why HMRC launched the Tax avoidance: don’t get caught out national campaign to help contractors – such as agency nurses or those thinking of going freelance – to understand the risks of using tax avoidance schemes and how schemes could be sold to them.

‘Each of us is responsible under UK law for paying the correct amount of tax. This still applies if contractors have appointed someone else to deal with their tax affairs or they have been given bad advice’

We want to warn healthcare workers of the pitfalls of using tax avoidance schemes and help them spot the signs that what they are being sold is avoidance. This is part of HMRC’s wider work to make it much harder for promoters to operate.

Healthcare workers who use tax avoidance schemes can end up having to pay back the tax they should have paid in the first place, with interest and potentially a penalty. That is on top of the fees they have already paid for joining the scheme.

Using an umbrella company: why you may face an unexpected tax bill

HMRC wants to help anyone involved in such schemes to leave them – before they run up large tax bills like Tanya, a critical care agency nurse.

Tanya chose an umbrella company that gave her the highest take-home pay. They offered her a tax avoidance scheme, which she joined. While she was taking care of her patients, she discovered the model sold to her by her umbrella company had left her with an unexpected tax bill.

When someone uses a tax avoidance scheme, they take on all of the risk. That is because each of us is responsible under UK law for paying the correct amount of tax. This still applies if contractors have appointed someone else to deal with their tax affairs or they have been given bad advice – the ultimate responsibility rests with the individual.

Sadly, Tanya is not the only healthcare worker adversely affected by such schemes. HMRC’s spotlight article strongly advises healthcare workers to leave such schemes as early as possible and settle their tax affairs.

What is tax avoidance and what does it look like?

HMRC’s campaign aims to raise awareness among healthcare workers
HMRC’s campaign aims to raise awareness among healthcare workers

Tax avoidance is when people bend the rules of the tax system to try to pay less than they owe.

But you don’t need to be a tax expert to spot an avoidance scheme. Anything that looks too good to be true almost certainly is, and anything that claims you can take home more pay than you would expect or, for example, asks you to sign up to loans from an offshore trust just so you can be paid, is something to steer clear of.

HMRC is here to help nurses and other healthcare workers spot the warning signs and also help them to get out of avoidance schemes.

How to spot the signs of a tax avoidance scheme

  • The scheme allows you to keep more of your income than you would expect, with little or no deduction for income tax or national insurance contributions (NICs).
  • Some, or all of the payments are said to be  ‘non-taxable’. These  could be  described as  loans, annuities, bonuses or shares. These payments are no different to normal income and you still need to pay  income  tax  and NICs  on them.
  • Only a part of the total payments you receive are taxed as income.
  • You are offered a choice between a standard  and an ‘enhanced’ pay scheme. The enhanced version is likely to be tax avoidance.
  • You have been asked to sign more than one contract or agreement .
  • The employment contract or agreement does not state how your income will be paid or provide you with a breakdown of deductions.
  • You may be offered a ‘cash bonus’ if you recommend the scheme to a friend.

You may be told the scheme is safe and compliant or approved by HMRC.  This is not true  – HMRC  never  approves avoidance  schemes.

If you think you have joined such a scheme, it is crucial that you leave it as soon as you can. The earlier you leave, the sooner you can settle the tax that you owe and reduce your chances of higher tax bills.

Stop, challenge, protect

If you are offered a scheme, use the stop, challenge, protect aide memoire to ensure you are not getting into something that will cause you grief in the future:

  • Stop and take your time. Don’t sign anything that you are uncomfortable with or don’t understand. If you’re unsure, seek independent professional advice.
  • Challenge what you’re being told. Check for warning signs.
  • Protect yourself and others. If you think you have been offered a tax avoidance scheme, report it to HMRC, or if you need help getting out of one, contact us.

If you think you have spotted a tax avoidance scheme, you can report it by using the report tax fraud online form. Please make sure you enter the words ‘contractor campaign’ in the other information section.

And if you believe you have joined a tax avoidance scheme, contact us and we will help you get on the right track. We won’t be judgemental and if you can’t afford to pay what you owe in one go, we may be able to offer you an installment arrangement.


Further information


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