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Priority Accounts Ltd - tax avoidance

Priority Accounts Ltd - tax avoidance

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A client approached me recently having spent the last year working in the UK and also on the oil rigs near Aberdeen.  Most of this work had been done through PAYE but for a period of approx 3-4 months, he had worked through an umbrella company, namely "Priority Accounts Ltd".  This company is registered in the West Indies but operates on the Isle of Man.

According to what he told me, Priority invoice his client and after deducting a weekly fee, pay the balance to my client.  They have employed him to perform the work and paid him a 'salary' in return but they have not deducted PAYE.  They have told him that this income is not taxable in the UK.

I have told him that he must report this income as self employment earnings on his tax return as without the umbrella company this is what the income would have been.  My client is reluctant to do this as it will result in a fairly hefty tax and National Insurance bill for him.

Has anyone else encountered this provider?  Any comments welcome as I have been unable to find any reviews of this umbrella scheme.

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By fosterben
26th Jun 2015 16:04

I dont know this particular company but I know of similar, if they work the same way as others they will defend any query from HMRC as they work within the legal loopholes and are technically right in saying the money is non taxable, so if your client puts that same income as self employment he's in trouble. My advice, depending on your moral standpoint would be to plead ignorance or let the client utilise Priority's own accounting service if they have one.

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Replying to Tim Robinson:
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By hallsi
26th Jun 2015 16:19

outside UK jurisdiction

thanks for the reply.

Difficult call really because there's no information on their website but according to client they claim they're outside UK jurisdiction and therefore they have simply refused to co-operate with HMRC to-date.  Obviously that's his word and I've not approached them direct to confirm this.

"so if your client puts that same income as self employment he's in trouble"

why is client in trouble if he declares he income?  isn't that the better option in the circumstances?

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By fosterben
26th Jun 2015 16:38

Run....

To be honest with you if the company flat out refuses to respond to HMRC I would run a mile.

The best thing to do in this case is let him file how he sees fit on the work he has done whilst being "employed"  and strongly advise he doesnt do it going forward. If he still wishes to continue under an umbrella scheme I can point you in the direction of a company I have had dealings with and you can do your due diligence from there.

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By Tim Vane
26th Jun 2015 16:55

It sounds to me like your client's arrangement with the company is that of employee. He can therefore take a wage from that company, and it is that company's responsibility to determine whether the relationship is employment or self-employment. It is not your client's responsibility to decide that.

So, no matter what you personal misgivings of what the umbrella is doing, you should NOT advise the client to complete a self-assessment form, as this is neither in his interest nor is it his decision to make. He also presumably has it in writing that no tax is due, so should HMRC ever chase the company for underpaid PAYE/NIC then that is the umbrella's problem and not your client's problem.

Act in your client's best interests, not the interests of HMRC and the exchequer - if there is a loophole in the law that this company is exploiting then don't let it penalise your client.

I would be surprised, indeed utterly shocked, if HMRC ever tried to claim that your client was self-employed rather than employed, since it goes against just about every precedent and guideline they have tried to impose in the last ten years. Indeed, it would make a most fascinating test case.

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By andy.partridge
27th Jun 2015 11:17

Self-employment?

I can see what you are trying to do, but there is no party (even yourself) who could say with any certainty that the relationship is one of self-employment.

It seems to me that you believe the client should morally pay tax and this is a means to expedite that.

I can't help but think that you are not best placed to do the right thing for your client because your conscience won't let you. If there is any truth in this you should walk away. Better that than seek to coerce your client to take a course of action that sits well with your principles but potentially results in a significant and unnecessary tax bill.

Edit - Ignore me, my view has been superseded by more informed members

 

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By ShirleyM
26th Jun 2015 18:03

Here is an extract from their website
Services & FeesLet's keep things simple.

Priority Accounts is an accounting service, who offer an Intermediary Limited Company service to self-employed contract workers. Invoice processing and onward payment is the crucial aspect required by you, so we concentrate on this business model, ensuring you receive your funds in a timely fashion. You are not treated as an employee of any company, you are to be registered as a 'self-employed contract worker'.

I would have put it on the self employed pages, too. How does it save tax if the worker is self employed, and a UK resident?

 

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By MC1
26th Jun 2015 18:20

Anything to do with "Priority Accounts Limited"

Presumably nothing to do with Priority Accounts Limited dissolved 28/10/2014?

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By MC1
26th Jun 2015 18:24

Or Priority Accounts (UK) Limited incorporated 25/6/14?

Both registered in Sheffield

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By Duncan Cameron
26th Jun 2015 19:18

Find out more

I don’t think that the mere fact that the payer has no presence in the UK makes income tax-free. For a start in would mean that the profits on exports wouldn’t be taxed and everybody would run their business via overseas entities. I am sure it is not that simple to avoid tax.

The client has probably got hold of the wrong end of the stick. Free of PAYE and free of tax are not the same thing.

The client’s true status will not matter if the agency rules deem him to be an employee (of someone).

If Priority are correctly not deducting PAYE & NIC then possibly someone else should (the ‘host’ employer).

I think that you need to be very, very sure that the loophole that Mr Vane postulates exists before you advise omission of income from the tax return or its entry in the wrong places or in advising not notifying chargeability. If a notice to file has been issued then advising the client not to complete the return will simply lead to penalties for the client.

Find out more and if still in doubt write to HMRC – but hurry if you want a reply before the January filing deadline.

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By hallsi
27th Jun 2015 07:34

thanks for all your posts

Interesting to read some of the responses, thank you.

Priority Accounts Ltd is in fact registered in the British Islands Territory of Anguilla, company number 2127342.  No accounts are published nor details of participators and, according to my client, any requests for information from UK agencies are flatly refused.  At present, HMRC have no powers to demand such information nor take any form of action.  Yes I suppose they are exploiting a loophole whilst it still exists.

As pointed out by Shirley, they are "registered as a 'self-employed contract worker'". the subcontractor is working for a foreign entity but carrying out the work in the UK.  As the client is also UK resident, surely this points towards the income being taxable in the UK as self employment income?  The inclusion of the foreign intermediary company appears to serve no purpose other than the administration of invoicing and collecting monies on behalf of the subcontractor.

I'm not looking to raise the moral/ethical argument over whether I am obligated to ensure my client pays the right amount of tax, ie the tax avoidance debate, that was not the purpose of my post.  Rather, I think if left, this could lead to a serious problem for my client because I'm unconvinced that this umbrella scheme actually works for the client.  Similar to the number of high profile celebrities that have been caught out in recent years by such schemes, I don't wish to see my client being tripped up a later date without me first offering him the right advice to make an informed decision.

Incidentally, my client is already under Self Assessment and therefore already under the microscope.

thanks.

 

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Replying to lionofludesch:
paddle steamer
By DJKL
27th Jun 2015 11:53

Your interpretation looks correct

hallsi wrote:

Interesting to read some of the responses, thank you.

Priority Accounts Ltd is in fact registered in the British Islands Territory of Anguilla, company number 2127342.  No accounts are published nor details of participators and, according to my client, any requests for information from UK agencies are flatly refused.  At present, HMRC have no powers to demand such information nor take any form of action.  Yes I suppose they are exploiting a loophole whilst it still exists.

As pointed out by Shirley, they are "registered as a 'self-employed contract worker'". the subcontractor is working for a foreign entity but carrying out the work in the UK.  As the client is also UK resident, surely this points towards the income being taxable in the UK as self employment income?  The inclusion of the foreign intermediary company appears to serve no purpose other than the administration of invoicing and collecting monies on behalf of the subcontractor.

I'm not looking to raise the moral/ethical argument over whether I am obligated to ensure my client pays the right amount of tax, ie the tax avoidance debate, that was not the purpose of my post.  Rather, I think if left, this could lead to a serious problem for my client because I'm unconvinced that this umbrella scheme actually works for the client.  Similar to the number of high profile celebrities that have been caught out in recent years by such schemes, I don't wish to see my client being tripped up a later date without me first offering him the right advice to make an informed decision.

Incidentally, my client is already under Self Assessment and therefore already under the microscope.

thanks.

 

 

Your interpretation looks correct.

This looks like a classic case of Chinese whispers, as posted above the cut and paste from their website appears to make no mention of escaping UK tax and states that their structure preserves the self employed status of the individual. Have the company really actually said  the amounts fully escape UK tax to the client or has he/she misunderstood?

So, given my experience of clients, the client misinterpreting what he/she has been advised re the UK tax position re these earnings is the most likely scenario.

 Now whether the client is self employed presumably hinges on the badges of trade, HMRC may well argue that costs incurred by the individual which are wholly and exclusively but not wholly and exclusively and necessarily are not competent to be claimed, thus the issue does really seem to boil down to including on the tax return as employment income, with no employer ref number and no tax/NI deducted, or entering as self employed earnings, not straightforward.

Either way I think a white box note is warranted to protect both the client and his/her accountant.

Good luck to the OP.

Edit:The undernoted additional snippet from their website states what they believe they offer,

"If you work freelance on contracts and wish to preserve you self-employed status, you need an Intermediary Limited Company service provider to handle your timesheet invoices and subsequent payments.  A company that cares about you and cares about the service offered to your clients."

 

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By taxguru
27th Jun 2015 09:15

Whilst the overseas intermediary can't obviously be brought under a UK legislation, almost any and every loophole working through an offshore intermediary has been plugged through changes to the law in recent years. If s.689(2) ITEPA/03 doesn't bite then s.689 (IB), effective Apriil 2014 though, will.

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By vowlesj
27th Jun 2015 10:36

can of worms

Certainly is a bit of a can of worms - by virtue of the agency rules as referenced by taxguru should hallsi's client declare the net income as paye or self-employed? ...and I doubt very much that Priority's end clients in the UK are aware that they have racked up a fairly chunky ni bill and a looming investigation!

From a practical perspective I would think Hallsi's client should declare the income as self-employed income.  This also makes sense when HMRC will allow the end client credit for any self-employed tax paid by their 'employees' when they finally catch up with them.

As HMRC also read Accounting Web, and if past actions are any guide, I think we should all wait for them to pay a huge amount of money to an irate member of Priority Accounts staff to gain access to the end client list and then wait for the press release they will undoubtedly issue!

Although it might also be useful to run a search on all your clients accounting systems for Priority Accounts so you can warn them before the HMRC letters arrive on their doorstep!

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