HMRC has stopped hiring users of disguised remuneration schemes

Following requests for clarification on HMRC’s use of contractors signed up to disguised remuneration schemes, the head of the tax authority has written to MPs confirming that it no longer hires this type of contractor

Jim Harra, HMRC chief executive and first permanent secretary, has written to the chairs of the All Party Parliamentary Group on the Loan Charge, in response to its letter on HMRC’s use of contractors received in February 2021.

In the letter, Harra said: ‘In addition to the checks we carry out in relation to our contingent workers and the compliance of our suppliers, HMRC has well-established tax compliance processes for acting on information that it receives from the public and other sources.

‘Regardless of how HMRC discovers that a contingent worker is a current user of disguised remuneration, we always act to immediately terminate their engagement. Similarly, regardless of how HMRC discovers that a service contractor working for a supplier is a current user of disguised remuneration, we will ask the supplier to take that individual off HMRC work.’

Since 2017, HMRC said it has matched the data in its centralised contingent worker database with the information it holds on known users of disguised remuneration tax avoidance. As these contingent workers were engaged through intermediaries, the information held on the workers was initially limited.

Since then, HMRC has worked to improve the quality of the information held on HMRC’s contingent workers.

Harra said: ‘This has greatly enhanced our ability to detect disguised remuneration scheme use among them and we now check the tax position of our contingent workers every four months. In addition, we have strengthened our pre-employment checks and will shortly publish a report setting out HMRC’s approach to tax compliance by its suppliers.’

HMRC has now completed a full analysis of its contractors to assess the level of use of disguised remuneration. It has identified 15 cases where disguised remuneration use was concurrent with doing work for HMRC. Of these were contingent workers and two were contractors engaged by one of HMRC’s supplier organisations.

However, HMRC did caveat the information, stating ‘it is possible that there will be more contractors who used disguised remuneration while working for HMRC than the 15 cases currently identified’.

Harra concluded: ‘Whenever HMRC has discovered that a contingent worker is a current user of a disguised remuneration scheme, we have acted immediately to terminate the engagement, and we continue to follow this approach.’

Jim Harra letter to Loan Charge All-Party Parliamentary Group

Sara White |Editor, Accountancy Daily, published by Croner-i

Sara White is editor of Accountancy Daily, published by Croner-i, and in...

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