Sidcup umbrella flagged for tax avoidance scheme

Sidcup umbrella flagged for tax avoidance scheme

Dec 27, 2023

A Kent payroll company is promoting tax avoidance schemes putting users at risk of HMRC investigations

Sidcup based MLG Pay Limited has been named and shamed on HMRC’s list of tax avoidance promoters.

MLG was set up in September 2021 and has a sole director, Michelle Louise Grey and no direct employees. It only files total exemption accounts at Companies House so it is not possible to establish the scale of the operation.

The company provides an umbrella service to contractors, freelancers and temporary employees, working with employment agencies and businesses. Essentially people are employed by MLG and its website states: ‘We will pay your tax and National Insurance deductions to HMRC on your behalf and pay you a PAYE salary net of all deductions/contributions upon receipt of payment.’

However, in line with many of the umbrella companies promoting these schemes, MLG artificially separates users pay into two elements, half of which is paid gross and therefore untaxed.

The first element is a salary with income tax and National Insurance contributions (NICs) deducted. The second part is paid tax-free with no deduction and is described as an ‘option grant’ or sometimes as ‘benefits in kind’.

HMRC’s view is that both elements of the payment should be treated as ‘normal income/as the user’s salary’, and is therefore subject to tax and NICs.

This issued was highlighted in Spotlight 60 on Disguised remuneration schemes involving agency workers and contractors employed by umbrella companies.

Users of the scheme are breaking the law by not paying taxes and the umbrella companies get off scot-free apart from being named on HMRC’s tax avoidance promoters’ list.

HMRC advises employees of MLG to ‘familiarise themselves with the 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.