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NHS hands over millions to tax avoidance firms  

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NHS hands over millions to tax avoidance firms  

https://www.thetimes.co.uk/article/nhs-hands-over-millions-to-tax-avoidance-firms-kfqmn87fp

Quote

NHS hospital trusts are paying millions of pounds to advisers who have helped them dodge up to £1bn in tax, The Sunday Times can reveal.

Public funds have been spent on consultants who help hospitals avoid VAT on temporary medical staff. The advisers take up to 25% of the taxes that hospitals avoid.

The Independent Health Professionals Association (IHPA), which represents NHS locum staff, has submitted a dossier to the tax authorities exposing the practice. Dr Iain Campbell, IHPA secretary-general, said: “Trusts are wasting millions of pounds in fees on schemes that we are challenging as unlawful.”

One of the biggest promoters of VAT avoidance in the NHS is the financial consultancy Brookson, based in Warrington, Cheshire. The firm says its scheme is legal...

 

 

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I can understand wealth individuals/companies/institutions engaging the services of such specialists to advise and assist in enabling such money saving schemes on an initial or one-off basis.

What I can't understand is how, IF one is going to engage in the process on a continuing basis, one does not simply pay to employ full time staff to administer it - rather than pay the exhorbitant fees of specialist consultants on a contiuniung basis.  Once they have shown you how to do it their services should not, in principle, be needed anymore.

Of course we can all be sure that whatever these companies mnage to save the NHS you can be sure will just end up lining tthe pockets of the NHS management (e.g. support pensions, etc) rather be directed to frontline NHS services. So the net benefit to Joe Public will likely be zilch. But that's a separate story.

Edited by anonguest

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2 hours ago, anonguest said:

I can understand wealth individuals/companies/institutions engaging the services of such specialists to advise and assist in enabling such money saving schemes on an initial or one-off basis.

What I can't understand is how, IF one is going to engage in the process on a continuing basis, one does not simply pay to employ full time staff to administer it - rather than pay the exhorbitant fees of specialist consultants on a contiuniung basis.  Once they have shown you how to do it their services should not, in principle, be needed anymore.

Keeping a third party contracted means the NHS management feel they have a scapegoat ready to blame if they are found to have broken the law. Taking the responsibility on themselves to administer the same over the coming years, while tax law etc slowly changes and they have to start taking responsibility for making decisions about the scheme, puts them squarely in the frame if they are eventually found to have broken the law.

I can't read the full article but from looking at Twitter (#nhstaxscandal) I understand some NHS trusts are forcing locums into 'self-employment' working for umbrella companies instead of within ir35, or as 'vanilla paye' employees. I assume the VAT element is that most staff (mainly consultants  it seems) will be over the vat charging threshold but, presumably, the umbrella doesn't charge vat back on its services. 

The whole lot will come tumbling down at some point once HMRC get involved, but it could leave consultants with a vat liability over several years they unexpectedly have to pay, or potentially a big tax bill if it's an IR35 dodge in a similar vein to the recent BBC forced umbrella scandal.

Edited by regprentice
Clarity

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10 minutes ago, regprentice said:

Keeping a third party contracted means the NHS management feel they have a scapegoat ready to blame if they are found to have broken the law. Taking the responsibility on themselves to administer the same over the coming years, while tax law etc slowly changes, puts them squarely in the frame if they are eventually found to have broken the law.

I can't read the full article but from looking at Twitter (#nhstaxscandal) I understand some NHS trusts are forcing locums into 'self-employment' working for umbrella companies instead of within ir35, or as 'vanilla paye' employees. I assume the VAT element is that most staff (mainly consultants  it seems) will be over the vat charging threshold but, presumably, the umbrella doesn't charge vat back on its services. 

The whole lot will come tumbling down at some point once HMRC get involved, but it could leave consultants with a vat liability over several years they unexpectedly have to pay, or potentially a big tax bill if it's an IR35 dodge in a similar vein to the recent BBC forced umbrella scandal.

Surely it makes no difference? IF its the consultants or in-house staff doing running the schemes as it won't protect  NHS trusts from having to pay back any tax they temporarily avoided, that is subsequentky deemed by TPTB that it has to be paid after all.

Edited by anonguest

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All businesses try to avoid as much tax as possible - wouldn’t you? It’s like complaining that your neighbour uses an ISA and SIPP to avoid tax.

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14 minutes ago, anonguest said:

Surely it makes no difference? IF its the consultants or in-house staff doing runnign the schemes as it won't protect  NHS trusts from having to pay back any tax they temporarily avoided, that is subsequentky deemed by TPTB that it has to be paid after all.

I agree with you. But I feel that's why they've done it.

I've had a similar conversation with my father in law. He worked as a temping science teacher, working for an umbrella and paying himself out of the isle of man as loans, effectively paying less than 10% tax on his total annual income. I've told him he'll get caught, and shown him another Times article earlier in the year about a similar clampdown on teachers and nurses who used these schemes. He won't have any of it, his financial adviser told him it was legit, he's got a solicitors letter saying the scheme is lawful (just like the brooksons in the article claim) so he reckons HMRC will just have to go away.

The 25% that NHS trust is paying is so that the trustees and managers can sleep at night until they cash out just as TSHTF, nothing more.

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3 minutes ago, dropbear said:

All businesses try to avoid as much tax as possible - wouldn’t you? It’s like complaining that your neighbour uses an ISA and SIPP to avoid tax.

As | alluded to.....I agree.  Nowt wrong in using legal means to reduce tax - even the NHS.

My point was the cost ineffective way of them doing it.

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Just now, regprentice said:

I agree with you. But I feel that's why they've done it.

I've had a similar conversation with my father in law. He worked as a temping science teacher, working for an umbrella and paying himself out of the isle of man as loans, effectively paying less than 10% tax on his total annual income. I've told him he'll get caught, and shown him another Times article earlier in the year about a similar clampdown on teachers and nurses who used these schemes. He won't have any of it, his financial adviser told him it was legit, he's got a solicitors letter saying the scheme is lawful (just like the brooksons in the article claim) so he reckons HMRC will just have to go away.

The 25% that NHS trust is paying is so that the trustees and managers can sleep at night until they cash out just as TSHTF, nothing more.

Loans you say. You may want to send him http://blogs.mazars.com/letstalktax/2018/02/2019-loan-charge-another-weapon-for-hmrc/ 

but one day the umbrella will disappear (probably with his last pay packet) and HMRC will start asking very painful questions before passing it to their friendly debt recovery department.

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12 minutes ago, regprentice said:

I agree with you. But I feel that's why they've done it.

I've had a similar conversation with my father in law. He worked as a temping science teacher, working for an umbrella and paying himself out of the isle of man as loans, effectively paying less than 10% tax on his total annual income. I've told him he'll get caught, and shown him another Times article earlier in the year about a similar clampdown on teachers and nurses who used these schemes. He won't have any of it, his financial adviser told him it was legit, he's got a solicitors letter saying the scheme is lawful (just like the brooksons in the article claim) so he reckons HMRC will just have to go away.

The 25% that NHS trust is paying is so that the trustees and managers can sleep at night until they cash out just as TSHTF, nothing more.

That will blow up in his face.

 

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' He won't have any of it, his financial adviser told him it was legit, he's got a solicitors letter saying the scheme is lawful '

My standard response to these idiot, unemployed IFA/small town tax accountant/solicitors is to ask:

'Who goes to prison? Them or you?'

Watching my brother deal w out of one of thes magic schemes.

As my mum used to say, before TSHTF,  'Hes got a very good accountant'


Yes ... so good, the bloke sits in spoons doing oilies books/taxes.

 

 

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35 minutes ago, regprentice said:

Keeping a third party contracted means the NHS management feel they have a scapegoat ready to blame if they are found to have broken the law. Taking the responsibility on themselves to administer the same over the coming years, while tax law etc slowly changes and they have to start taking responsibility for making decisions about the scheme, puts them squarely in the frame if they are eventually found to have broken the law.

I can't read the full article but from looking at Twitter (#nhstaxscandal) I understand some NHS trusts are forcing locums into 'self-employment' working for umbrella companies instead of within ir35, or as 'vanilla paye' employees. I assume the VAT element is that most staff (mainly consultants  it seems) will be over the vat charging threshold but, presumably, the umbrella doesn't charge vat back on its services. 

The whole lot will come tumbling down at some point once HMRC get involved, but it could leave consultants with a vat liability over several years they unexpectedly have to pay, or potentially a big tax bill if it's an IR35 dodge in a similar vein to the recent BBC forced umbrella scandal.

https://www.yorkshirepost.co.uk/news/christa-ackroyd-exclusive-yes-i-cried-over-it-but-why-did-bbc-take-me-off-air-over-a-contract-dispute-1-9033647

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48 minutes ago, regprentice said:

Keeping a third party contracted means the NHS management feel they have a scapegoat ready to blame if they are found to have broken the law. Taking the responsibility on themselves to administer the same over the coming years, while tax law etc slowly changes and they have to start taking responsibility for making decisions about the scheme, puts them squarely in the frame if they are eventually found to have broken the law.

I can't read the full article but from looking at Twitter (#nhstaxscandal) I understand some NHS trusts are forcing locums into 'self-employment' working for umbrella companies instead of within ir35, or as 'vanilla paye' employees. I assume the VAT element is that most staff (mainly consultants  it seems) will be over the vat charging threshold but, presumably, the umbrella doesn't charge vat back on its services. 

The whole lot will come tumbling down at some point once HMRC get involved, but it could leave consultants with a vat liability over several years they unexpectedly have to pay, or potentially a big tax bill if it's an IR35 dodge in a similar vein to the recent BBC forced umbrella scandal.

There are 2 separate issues here.

Locums are usually recruited via agencies as they are better at paying their bills than a typical NHS trust. Agencies (of course) charge VAT on their bills and that is what the trusts are trying to avoid paying (or at least trying to find a means to reclaim the costs) using these tax schemes.

Separately a lot of locum work was marked as inside IR35 as of April 2017 (the rules for IR35 within the public sector changed then). So while they used to be self-employed (or via a limited company) the work is now either via an umbrella or similar system. That is going to blow up in the near future in a lot of different ways - one of which may be due to lack of staff resulting in far high than expected death rates during the winter (a lot of the locums I knew no longer work in the UK and have moved to ireland, OZ or various parts of europe).

Edited by Houdini

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32 minutes ago, spyguy said:

' He won't have any of it, his financial adviser told him it was legit, he's got a solicitors letter saying the scheme is lawful '

My standard response to these idiot, unemployed IFA/small town tax accountant/solicitors is to ask:

'Who goes to prison? Them or you?'

Watching my brother deal w out of one of thes magic schemes.

As my mum used to say, before TSHTF,  'Hes got a very good accountant'


Yes ... so good, the bloke sits in spoons doing oilies books/taxes.

 

 

Small time unemployed is probably right. A "good accountant" stretching tax law to the limit is probably a bad one. In my experience most are so fearful of litigation and not being covered by professionsal indemnity that they play with beyond a straight bat these days. I'm not surprised that a quasi public sector institution is involved as there is a myth in public sector circles that accountants are there to defraud tax. The law is so strict now that they have to report fraud to the tax authorities even if they are not involved at penalty of being struck off.

Edited by crashmonitor

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