HM Revenue and Customs (HMRC) is urging workers to check their payslips to make sure they are not the victim of a tax avoidance scheme – here’s what to look out for
HM Revenue and Customs (HMRC) is warning workers to keep a close eye on their payslips to ensure they’re not being used as pawns in their employer’s tax avoidance schemes. As part of its ‘don’t get caught out’ campaign, the government body is urging employees to be vigilant for signs of tax evasion.
One simple way to check if you’re paying the correct amount of tax is by scrutinising your payslip. By examining their payslips and contractual agreements, workers can verify that they are correctly paying Income Tax and National Insurance contributions, typically through the PAYE system. A potential red flag indicating involvement in a tax avoidance scheme could be receiving more money in your bank account than what is reflected on your payslip.
HMRC has warned that some employers may attempt to manipulate the system to pay less tax than they are legally obliged to. Those most at risk of falling victim to such schemes include contractors working for umbrella companies, many of whom may be unaware of the correct procedures for tax payments through these companies.
According to HMRC guidelines, contractors for umbrella companies should receive payment by submitting their timesheets to a recruitment agency, which then bills clients. The recruitment agency then pays the umbrella company the agreed rate, calculated by multiplying the assignment rate by the hours worked.
The umbrella company, acting as their employer, will then pay the contractor. Contractors are legally entitled to a payslip that should detail deductions made, including Income Tax, National Insurance and student loan repayments where applicable.
What if I suspect I’m involved in a tax avoidance scheme?
If you suspect you’re part of a tax avoidance scheme, it’s recommended that you get in touch with HMRC at your earliest convenience for advice on what steps to take. It’s crucial to remember that it’s ultimately your responsibility to settle any tax you owe, even if you fall victim to a tax avoidance scheme.
In some instances, you might have to pay interest on the due tax, which could accumulate and result in an unexpected and hefty bill. If you’re uncertain about whether you’re paying the correct amount of tax, you can utilise this interactive risk checker for more clarity – ensure you have the following documents ready before using the checker:
- any other documents you have relating to your employment arrangements
- payslips
- key information document
- payment advice
- bank statements
- employment contracts or agreements
More details on tax avoidance schemes and what you can do about them can be found here.
