HMRC tax update as it vows to fight in courts and says 'check payslip'

HM Revenue and Customs (HMRC) is urging the public to steer clear of tax avoidance schemes, warning that they could result in significant financial losses.

As part of its ongoing Don't Get Caught Out campaign, the government aims to help HMRC customers evade fines and legal complications by being mindful of certain key factors. Official guidelines define tax avoidance as any attempt by an individual or organisation to manipulate the tax system to their financial advantage.

Such attempts can encompass a range of activities, including contrived transactions designed to give the illusion of tax payment. However, HMRC has emphasised that these schemes are ineffective and can lead to participants paying more tax than they initially sought to evade.

Moreover, it pointed out that it is 'likely' to triumph over such schemes in court, given that HMRC has won or partially won approximately 90% of tax avoidance cases brought before the courts. This figure does not account for instances where taxpayers settled prior to court proceedings, such as agreeing to pay all outstanding tax and penalties when requested.

Furthermore, HMRC's official guidance underlines that the financial risks associated with tax avoidance schemes predominantly fall on the victim. The individuals orchestrating these schemes are unlikely to provide support once an HMRC investigation commences.

In some instances, scheme promoters vanish after securing the funds they desire, leaving victims in a precarious position.

One simple way to ensure you're paying the right amount of tax is by carefully checking your payslip. By thoroughly reviewing their payslips and contractual agreements, employees can verify they are correctly paying Income Tax and National Insurance contributions, usually through the PAYE system.

A potential red flag for involvement in a tax avoidance scheme could be seeing more money in your bank account than what is shown on your payslip. HMRC has warned that some employers may attempt to manipulate the system to pay less tax than legally due.

Those most at risk from such schemes include contractors operating under umbrella companies, many of whom may not be familiar with the correct procedures for tax payments through these companies. According to HMRC guidelines, contractors working for umbrella companies should receive their payment by submitting timesheets to a recruitment agency.

The agency then bills clients and pays the umbrella company the agreed rate, calculated by multiplying the assignment rate by the hours worked.

The umbrella company, acting as the contractor's employer, then pays the contractor. Contractors are legally entitled to a payslip detailing any deductions made, including Income Tax, National Insurance, and student loan repayments where applicable.

More warnings on tax avoidance can be found here.

If you have suspicions that you're part of a tax evasion scheme, it's recommended to reach out to HMRC immediately for advice on the appropriate course of action. Bear in mind that settling any outstanding tax is your responsibility, even if you unwittingly fall prey to a tax avoidance scheme.

In certain instances, you might be required to pay interest on the owed tax, which could accumulate and lead to an unexpectedly hefty bill. If you're uncertain about whether you're paying the correct amount of tax, this interactive risk checker can provide more clarity - make sure you have the following documents at hand 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 information on tax avoidance schemes and what you can do about them can be found here.

The government also maintains a regularly updated list of known tax avoidance schemes and promoters which can be found here.