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  • Shepherd Partnership

If you are working through an agency and not paying much tax you could be involved in tax avoidance

Don't get caught out!

HMRC’s ‘Tax avoidance - don’t get caught out’ campaign helps contractors who are self-employed or employed through an agency understand their pay arrangements so they don’t get an unexpected tax bill. Generally speaking, if the arrangement sounds too good to be true, then it probably is.

You are a ‘contractor’ if you are someone who provides services to clients that do not directly engage them. This may be through an ‘umbrella company’, an agency, a partnership or their own company, such as a Personal Service Company. This applies to people in PAYE as well as Self Assessment.

You can learn how to 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.

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, putting contractors at risk. Read HMRC’s guide to what it’s like to work through an umbrella company.

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.

We are here to help. Please get in touch if you want further advice.

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