Peak PAYE Ltd 'named and shamed' by HMRC as a scheme promoter to avoid

An avoidance scheme promoter with “chutzpah” has been added to HMRC’s list of companies which the tax authority says contractors should withdraw from using.

This characterisation of the now-blackmarked avoidance promoter -- Peak PAYE Limited, which touted contractor take-home pay of up to 85%, was made by WTT Consulting.

A tax dispute specialist, WTT observes that despite being ‘named and shamed’ by HMRC, Peak PAYE (of 86-90 Paul St. EC2A 4NE), is continuing to take calls from would-be users.

'Chutzpah'

“If the [corresponding] website [to the] the named party [by HMRC] are the same, they are still answering the phone which shows some chutzpah,” mused WTT’s Graham Webber.

But Peak PAYE isn’t responding to emails, at least not emails from ContractorUK asking for its take on joining Purple Pay Ltd and Absolute Outsourcing Ltd as firms HMRC says to avoid.

“The issue with these schemes is that they appear to be operating as ‘normal’ umbrella companies,” says umbrella company compliance consultant Shelley Ankers-Wainwright.

'Complicated clauses that don't make sense'

An assessor of firms for FCSA accreditation, Ms Wainwright of SAW Consulting continued to ContractorUK: “They even offer an employment contract and payslip showing the NMW.

“But it’s so important that contractors are aware of these [avoidance] schemes -- always be wary of inflated take-home pay, and complicated clauses in contracts that don’t make sense.”

HMRC says Peak PAYE users entered into a contract with ‘PEAK,’ stipulating they will work on “client assignments,” and that PEAK will pay them at least the NMW.

'Eighty-five per cent of expected gross contract earnings'

But at the same time, users entered in to an ‘Agreement to Grant an Option,’ and after the NMW payment, PEAK paid the balance to users as payment from the grant of an option.

“These are paid in one aggregate payment,” HMRC says in an abridged version of its longer briefing on PEAK’s modus operandi.

“This secondary element of the payment as shown on the Option Grant note is not subject to deductions of tax and National Insurance Contributions. The aggregate payments amount to around 80-85% of the expected gross contract earnings.”

'Schemes still being tried and tested'

Having been taken in by a scheme, Mike Stannard, operations manager at Skipper Recruit took to LinkedIn to suggest he couldn’t be more disgusted by such sham arrangements.

Mr Stannard posted: “Having read this [HMRC briefing] carefully, it is apparent that such schemes are still being tried and tested by providers.

“I have always been careful to ensure our workers are not caught up in these schemes, as I have personally fallen foul of them.

“Schemes that offer payment for expenses or reduced taxation, or worse still leave a worker with a tax bill at the end of the financial year, are all abhorrent.”

'Huge tax bill'

The right to identify tax avoidance schemes, promoters, enablers and suppliers was granted to  HMRC at Autumn Budget 2021, and a resulting ‘blacklist’ was unveiled in April 2022.

“The more schemes that can be named, the more likely it is to protect someone from becoming victim to a huge future tax bill,” says IWORK founder Julia Kermode.

“Although there are only three [schemes] listed currently, I for one am very pleased to see HMRC taking proactive steps to ‘name and shame.’ And I hope they keep on doing this.”

'Tip of the iceberg'

Speaking later, Ms Kermode conceded it was a “poor” use of a new power by HMRC, to publish a list with just two promoters (AOL and PPL), and to then take two months to update the list – albeit with only a single promoter (Peak PAYE).

She reflected: “I know it's a pitifully low number right now, but fingers crossed more get named -- there's lots more out there.

“[Indeed, these three are] just the tip of the iceberg in relation to the number of schemes that are operating in the contractor market.”

'Taxman stepping up enforcement against umbrella tax avoidance'

In agreement that three promoters being ‘named and shamed’ is better than none being ‘named and shamed’ is Tracey Williams of TJW Contract Solutions Ltd.

“Let’s hope they keep updating the list,” she said of HMRC, “and [continue] going after non-compliant providers.”  

A law firm says that amid the absence of the widely-encouraged Single Enforcement Body to regulate umbrellas, the signs are that the taxman is already doing more.

“HMRC certainly seems to be stepping up enforcement on umbrella tax avoidance,” said Lawspeed, which specialise in recruitment law.

The firm says it will soon advise on the risks of working with non-compliant providers, plus “steps you can take to ensure you work only with umbrellas that do not expose you to risk.”

'A tick-box era'

But sometimes -- potentially even often, such exposure inadvertently begins in the heat of the moment.

“We live in a time where we just tick a box on our phone to accept T&Cs without reading them, but this is a contract of employment,” cautions umbrella compliance consultant Ms Wainwright.

“So I urge all contractors to read their contract thoroughly. And if there’s something you don’t understand, ask -- before you sign it, or expect HMRC to pursue you for unpaid tax.”

'HMRC could follow that path'

In relation to AOL, but potentially applicable to any scheme deemed by HMRC not to work, WTT’s tax director Mr Webber confirmed that contractors face being chased.

“HMRC's default position is often that sums of tax unpaid by employers who run avoidance arrangements could, and should, be visited upon employees.

“We suggest, therefore, that HMRC could follow that path here and not attempt to use their considerable powers to collect tax from the employer”.

'Forced'

Issuing the advice yesterday, Mr Webber added: “HMRC could -- and in our opinion, should -- make every effort to collect tax from the above.

“We hope that they will but we suggest that they may need to be persuaded -- even forced -- to do that.”

Ironically, one contractor has already had to resort to forcefulness to avoid being burned.

'Still a long way to go'

An IT portfolio director, he shared in a thread: “A company called me last week, offering to manage my ‘payroll’ and reduce my taxes. I had to hang up. He wasn’t going to give up.”

At SAW Consulting, Ms Wainwright reflected: “It’s positive to see another company, Peak PAYE Ltd, ‘named and shamed’ by HMRC. But there is still a long way to go.

“We have been banging this drum for some time…[because] we know there are many more similar schemes out there. Let’s hope we see many more names on HMRC’s avoidance scheme list, sooner rather than later.”