A Liverpool promoter has been named and shamed by HMRC for running tax avoidance schemes
Purity Limited operates as Purity Contracting and has three directors including Rebecca Waterfield who is named on the HMRC list. In total, the agency has four staff with an estimated turnover in excess of £500,000.
The company was set up in May 2019 and Waterfield, who is a director of four companies including recruitment consultancy Alpha Republic, was appointed as a director and person of significant control in January 2022.
It promotes its services as an umbrella company which acts as an ‘employer’ for contractors, where they complete their work and submit a timesheet to their agency, providing payroll services.
The website claims that ‘you can work for multiple end clients under one umbrella company, the benefit of which is a lower rate of tax while servicing multiple contracts’.
Purity employees provide their services to an end client via a recruitment agency. The recruitment agency pays Purity for the work done by the employees, then makes two payments to the employees.
The first payment, a salary at the national minimum wage or national living wage rate, described on bank statements as ‘Purity salary’, has income tax and National Insurance contributions (NICs) deducted. The second payment, labelled as ‘Purity Adv’ is made tax free.
HMRC’s position is that the untaxed payment – ‘Purity Adv’ – is normal income, and is taxable. Information about HMRC’s position on the tax avoidance arrangements used by some umbrella companies was set out in Spotlight 60.
HMRC added that it is aware that some umbrella companies operate more than one scheme, for example, a standard compliant scheme and a non-compliant scheme.
Employees of Purity are warned to familiarise themselves with the latest HMRC guidance and to satisfy themselves that the correct amount of tax is being deducted on their income.
Any affected employees need to complete a self assessment tax return and ensure they pay the correct tax. The filing deadline is 31 January for the 2022-23 tax year.