The UK’s tax authority has issued a warning over a practice which could leave Brits with hefty bills to pay
HM Revenues and Customs (HMRC) has urged people to check their payslips for warning signs of tax avoidance. The Government authority explained that, while it may seem difficult to detect, a straightforward check can help you avoid dodgy schemes.
“Everyone can learn to spot the signs of tax avoidance, HMRC posted to X, formerly Twitter. “Don’t get caught out.” Put simply, tax avoidance involves ‘bending the rules of the tax system’ to gain an advantage by paying less tax.
This may encompass contrived artificial transactions that ‘serve little to no purpose’ other than producing this advantage. Temporary workers and contractors employed through certain ‘umbrella companies’ are particularly at risk, according to HMRC, especially if employers promise you can keep 80, 90 or 95% of your wages and be tax compliant.
Usually, this is too good to be true, as the basic rate of Income Tax sits at 20%, and National Insurance contributions are also due on earnings. Anyone found benefiting from a tax avoidance scheme will be required to pay off the tax that is legally due, plus interest and a potential penalty.
“Everyone is responsible under UK law for paying the correct amount of tax,” HMRC explained. “…Unfortunately, [these costs are] on top of any fees you’ve already paid the person who sold you the scheme.”
To protect yourself against this, HMRC suggests that assessing your payslips is critical. This applies to individuals on payrolls with PAYE and others who complete Self Assessment forms.
Receiving more money in your bank account than what is displayed on your payslip is one major red flag, in addition to receiving any untaxed payments like loans or capital advances. Crucially, the money noted on your payslip should always match your bank statement.
“Checking your payslips and contractual arrangements will help you confirm you are paying the right amount of Income Tax and National Insurance contributions,” HMRC added. “Doing this will mean you avoid getting an unexpected tax bill later.”
HMRC has compiled a list of known tax avoidance schemes. Although it’s not exhaustive, individuals can check it to see whether they are involved with any of the schemes.
Anyone who is, or believes they are part of another tax avoidance scheme, should contact HMRC as soon as possible. You can report such schemes online, or by telephone at 0800 788 887 between 9am to 5pm from Monday to Friday.
The tax office added: “Fill in the online form to tell HMRC what you know about the person or business. It helps if you share your name, location and contact details. HMRC can then contact you if they need more information.
“You do not have to give your personal details. Any information you do give will be kept private and confidential. For your own safety, you should not try to find out more or let anyone know you’re making a report.”
