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The head of the HMRC has addressed a letter to MPs following requests for clarification about the use of disguised remuneration schemes by contractors working for HMRC.
Jim Harra, HMRC chief executive and first permanent secretary, has written a letter to the chairs of the All Party Parliamentary Group on the Loan Charge, after the HMRC’s tax position on contractors was extensively questioned by both the Parliament and through Freedom of Information requests.
“In addition to the checks we carry out in relation to our contingent workers and the compliance of our suppliers, HMRC has well-established tax compliance processes for acting on information that it receives from the public and other sources,” Mr Harra’s letter reads.
“Regardless of how HMRC discovers that a contingent worker is a current user of DR, we always act to immediately terminate their engagement. Similarly, regardless of how HMRC discovers that a service contractor working for a supplier is a current user of DR, we will ask the supplier to take that individual off HMRC work.”
Denying claims by MPs that the HMRC withheld information about use of contractors that were found to be participating in tax-avoiding disguised remuneration (DR) schemes, Mr Harra said that since November 2018 the tax authority has done more work to establish an accurate position of scheme use among its contractors.
At the moment, the HMRC has identified 15 cases of contractors who used DR while working for HMRC.
“Since 2017, HMRC has matched the data in its centralised contingent worker database with the information it holds on known users of DR tax avoidance. As these contingent workers were engaged through intermediaries, the information held on the workers was initially limited.
“Since then, we have worked to improve the quality of the information that we hold on HMRC’s contingent workers. This has greatly enhanced our ability to detect DR scheme use among them and we now check the tax position of our contingent workers every four months,” Mr Harra said.
In addition, he revealed that the HMRC has strengthened its pre-employment checks and will shortly publish a report setting out its approach to tax compliance by its suppliers.
“It is possible that there will be more contractors who used DR while working for HMRC than the 15 cases currently identified,” Mr Harra admitted.
“Whenever HMRC has discovered that a contingent worker is a current user of DR scheme, we have acted immediately to terminate the engagement, and we continue to follow this approach.
“We will continue to assess the suitability and effectiveness of the checks we regularly carry out on contingent workers engaged by HMRC and RCDTS.”