Tax avoidance schemes aimed at those returning to tackle COVID-19

Liaison Group

Since we first highlighted the targeting of returning NHS workers by tax avoidance schemes, additional warnings have been issued in order to help those returning to the NHS workforce to navigate their tax obligations.

The subject was recently discussed on BBC Radio 4’s Money Box programme, which detailed how keyworkers returning to industries including the NHS were being targeted by unscrupulous umbrella companies claiming to ease the burden of personal tax management and offering sign-up bonuses or similar to entice those returning to work.

The schemes offered by such companies usually consist of two payments to the recipient – the first is declared as earnings going through the umbrella company payroll, often at a low flat rate or National Minimum Wage, and the second is a payment the umbrella company will declare as non-taxable, effectively dodging tax requirements through being described as an investment or loan.  

The intention is to attempt to disguise the true level of payment being made to the individual in order to pay a lower rate of Income Tax and National Insurance contribution, and is, in reality, a tax avoidance scheme which returning workers may not be aware that they are agreeing to and with damaging consequences.

In order to avoid this issue, some trusts and health boards have been advised to move to an engagement model for returning locum doctors, in which the locums are moved to self-employment. The intention in doing this is to achieve Employer’s NI savings and move the responsibility for tax payment to the worker. However, this approach breaches guidelines for a public company and so should not be pursued, as the temporary returning workforce is employed to provide their service as part of the NHS and are not viewed as self-employed under existing HMRC tests.

For further guidance in this matter, please get in touch at [email protected] to find out more about how we can help to ensure that returning doctors and keyworkers have the correct systems and support in place to ensure their smooth transition back to the workforce.