Published: 12/09/2022 By Hannah McCormackTax avoidance is pretty self-explanatory, it’s people or companies who try to dodge paying tax, which results in them paying less tax than what is actually owed. Read HMRC’s guide on “an introduction to tax avoidance” .
But how do you make sure you aren’t involved with a company who are involved in tax avoidance?
Anyone who is a contractor, agency worker or works though an umbrella company needs to check how they are paid to ensure they are not involved in tax avoidance. Some companies may try to attract new contractors by claiming you will be able to take home a higher percentage of your pay with them!
But how do you spot the signs?
Firstly, make sure you fully understand how you are being paid; this is good practice for both PAYE as well as Self-Assessment. Get your payslips and or contracts out to check if you are paying the correct amount of Income Tax and National Insurance. HMRC provide calculators for both Income Tax and National Insurance
Secondly, ensure the net amount listed on your payslip is exactly the same amount that you are being paid into your bank account.
Then lastly, check you are not receiving any additional payments on top of your net salary (that have not been taxed), such as loans as this additional payment could be a sign of tax avoidance. Some of these additional payments could be described as a bonus, profit share, credit facility, capital payment or advance and may not be listed on your payslip, you may be emailed separately to advise of the additional payment. You need to look for payments that have not been subject to PAYE, you may have even been told some of your income is not taxable! This could be another sign of tax avoidance.
That good old saying “if it sounds too good to be true it probably is” applies when it comes to spotting tax avoidance! Promises of lowering your tax bill if you just pay a company’s fees is another sign of tax avoidance.
Ultimately ensuring you are fully aware of how you are being paid and what is on your payslip is imperative to steering clear of any companies attempting to exercise tax avoidance.
If you would like assistance with your tax affairs give us a call for a complimentary chat to see how we could help, call 020 8661 7878 or email email@example.com