Anti-Avoidance Schemes

In a recent webinar hosted by Liaison Financial, independent tax consultant, Alastair Kendrick, provided a useful reminder to anyone working within NHS finance teams of the importance of remaining vigilant against tax avoidance schemes within employment contracts.

At the end of last year, HMRC sent out a briefing note to NHS organisations naming specific companies promoting tax avoidance schemes, and warned of the potential consequences of being found to have partaken in such activities.

For workers, the schemes often involve users entering into two separate but simultaneous employment contracts, one with an agency and one with a second party. The employees’ earnings are then split between a small taxable salary and a much larger payment, with the agency – incorrectly – claiming that while the salary is taxable, the larger payment is not. Schemes such as these often wrongly promise that their users can avoid National Insurance and Income Tax.

Therefore, NHS employers need to exercise care when engaging workers via an agency or other intermediary. If the NHS employer does not undertake the necessary due diligence, then they can be held liable to any resulting underpaid tax, together with interest and penalties.

As Alastair states: “These schemes are being exploited in certain sections of the public sector, and NHS organisations need to be on their guard.”

The NHS organisation is required to undertake due diligence to ensure PAYE/NIC is being correctly applied. It is important any contractor between the NHS employer and the intermediary sets out the requirements to operate within the tax rules, and those workers cannot be considered to fall outside of ‘employed’ for tax purposes.

In the HMRC’s briefing, Victoria Atkins MP, Financial Secretary to the Treasury, states: “It’s really important that HMRC continue to name avoidance schemes with their new powers, and I join them in calling for those involved to exit at the nearest opportunity. The government is committed to supporting HMRC in closing the net on the promoters of tax avoidance schemes”.

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