HMRC has named two tax avoidance schemes and their promoters for the first time, advising anyone involved to withdraw from them as soon as possible to prevent the build up of large tax bills.

Both schemes involve individuals working as contractors agreeing to an employment contract under which they are paid the National Minimum Wage (NMW). The balance of their wage is paid as a loan to try to avoid national insurance and income tax.

HMRC is letting taxpayers know as early as possible so they can steer clear of these schemes or exit them if they have already joined. This is the first time HMRC has used new powers to name tax avoidance schemes and their promoters as part of a campaign to warn the public not to get caught up in tax avoidance.

Mary Aiston, Director of Counter Avoidance at HMRC, said:

‘These schemes are cynically marketed as clever ways to pay less tax. The truth is they rarely work in the way the promoters claim and it’s the users that end up with big tax bills.

‘New legal powers allow us to name promoters and the schemes they peddle much faster, and this announcement is just the first step. But we need the public to be vigilant, and that’s why we’re also helping people identify and steer clear of these schemes through our Tax Avoidance – Don’t Get Caught Out campaign.’

Internet link: Tax Avoidance campaign website HMRC press release

Estimates show that up to £195 million in extra tax revenue has been collected via Making Tax Digital for VAT (MTD for VAT), according to research from HMRC.

The research, conducted by HMRC and peer reviewed by independent academics, showed that in 2019/20 the estimated additional tax revenue was between £185 million to £195 million, compared to a previous estimate of £115 million.

The tax authority stated that the additional revenue was due to the reduction in error on tax returns.

The research revealed that, for businesses below the £85,000 turnover threshold, the estimated additional tax revenue that is collected is £19 per business per quarter, which is a 2.2% increase from the average liability estimates for businesses not signed up to MTD.

For businesses above the threshold, the estimate of the average additional tax revenue is £57 per business per quarter and is a 0.9% increase.

Internet link: GOV.UK

The Bank of England has raised interest rates for the third consecutive time.

The Bank also warned that the Ukraine conflict could see under-pressure households hit with double-digit inflation later this year.

Members of the Bank’s Monetary Policy Committee (MPC) voted eight to one to increase rates from 0.5% to 0.75%. The move takes rates back to where they were before the pandemic struck.

Alpesh Paleja, Lead Economist at the Confederation of British Industry (CBI), said:

‘With ongoing conflict in Ukraine pushing global commodity prices higher and exacerbating supply chain disruption, the MPC are clearly making moves to counter growing inflation.

‘But they will be walking a tightrope in the months ahead, having to both keep price pressures in-check and manage the impact of tighter monetary policy on economic growth – particularly against a background of rising living costs.’

Internet link: Bank of England website

UK economic growth is expected to halve this year amid soaring inflation, major tax rises, and global shocks including Russia’s invasion of Ukraine, warns the British Chambers of Commerce (BCC).

The BCC has downgraded its expectations for UK GDP growth in 2022 to 3.6% from 4.2% in its previous forecast in December 2021. This would be less than half the growth of 7.5% recorded last year.

It says business investment is forecast to grow at 3.5% in 2022, down from the previous forecast of 5.1%.

The BCC says that rising raw material costs, the increase in the energy price cap, the reversal of the hospitality VAT cut and upward pressure on energy and commodity prices from the impact of Russia’s invasion of Ukraine will lift inflation.

The business group forecasts inflation reaching a peak of 8% in Q2 2022, the highest rate since July 1991. The BCC also projects that UK interest rates will double over the course of this year, from 0.5% to 1%.

Suren Thiru, Head of Economics at the BCC, said:

‘Our latest outlook suggests a legacy of COVID and Brexit is an increasingly unbalanced economy with a growing reliance on household spending to drive growth. Such economic imbalances leave the UK more exposed to economic shocks and reduces our productive potential.’

Internet link: BCC website