HMRC are running a campaign to raise awareness of some of the pitfalls many inadvertently find themselves in when managing their tax liabilities. This is of particular relevance this year, as many employers and contractors navigate the choppy waters created by IR35 updates introduced in April 2021. Almost one year on, and as we approach the end of HMRC’s “soft landing” period for IR35 compliance, it is interesting yet unsurprising to see this very public reminder of individual’s responsibilities. The campaign is aimed at everyone, whether you are self-employed, self-assess or are PAYE.
In this article, you will find links to resources on the HMRC website that will help you recognise the signs of tax avoidance and understand the financial risks by using HMRC’s how to spot tax avoidance guide and exploring some personal stories from people who have been caught up in tax avoidance.
Here at Carrington West, we work with contractors across all sectors we service. Contractors organise their finances in varying ways dependent on a number of factors. This can include through an ‘umbrella company’, a partnership or their own company, such as a Personal Service Company. It is important to understand exactly what you need to do to meet your tax obligations and make appropriate pay arrangements, so you do not get an unexpected tax bill.
If you are setting yourself up as a contractor for the first time, we recommend speaking with an independent tax adviser to fully understand your options. The best way to make sure you are not caught up in avoidance is to understand how you’re being paid and making sure you are paying the right amount of Income tax and National Insurance contributions. Visit HMRC’s payslip guide to understand more about what your payslip should look like, or use the risk checker to check whether your current contract could involve tax avoidance.
Some contractors may be employed through an umbrella company. It’s worth understanding how umbrella companies work as some try to break the tax rules. You can access HMRC’s guide to what it’s like to work through an umbrella company. You will also find more information on our approved umbrella partners on our website.
For more information please do reach out to a Carrington West consultant and they will be happy to point you in the right direction to find out more.