HMRC has warned taxpayers not to sign up to a Birmingham based 1st Choice Umbrella as the agency is paying contractors some of their earnings tax-free.
Tamworth based 1st Choice Umbrella operates the tax avoidance schemes and the business is run by director Carl Shepherd. It was set up in April 2018 and has 76 staff. According to Companies House it files abridged accounts and had £264,000 of current assets for year end March 2023.
The company’s website promotes itself to potential workers with the message: ‘Looking for a HMRC-friendly way to maximise your income?’, adding that the company ‘calculates PAYE on everything you earn ensuring that we remain 100% compliant at all times’.
However, HMRC has added the business to the tax avoidance promotors list, stating that 1st Choice Umbrella works with Omni Contractors PCC Limited, an Isle of Man based company run by director Carl Shepherd.
Omni Contractors PCC was set up in the Isle of Man in 2019 and before that traded under the name Focus Contractors PCC Ltd, simply changing its name to the new business. It is not the first time Omni Contractors has appeared on the HMRC list; it was first added in August 2022, but this has not acted as a deterrent.
HMRC has flagged a particular scheme called 1st Choice Umbrella Share Growth as an avoidance scheme.
Scheme users enter into an employment contract with 1st Choice Umbrella (1CU) and are issued a share in the cell company, Omni Contractor PCC Ltd. They then submit timesheets to 1CU who then invoice the agency or end client for the work done by the scheme user. 1CU retains approximately 10% of the invoiced amount, which is purportedly for covering any capital gains tax (CGT) the scheme user may be liable to in relation to the share and transfers this amount to Omni Contractor PCC.
The Isle of Man company claims that they will return the withheld CGT amount to the scheme user when their tax liability is confirmed. 1CU also retains a further amount of around 16-18% and then pays the scheme user a national minimum wage/national living wage salary.
Omni Contractor PCC pays the scheme user a separate amount but without deductions for tax and National Insurance Contributions. This supposedly represents the increased share value held in the company.
HMRC has issued the companies with Scheme Reference Number 66745555 under Disclosure of Tax Avoidance (DOTAS) rules.