SCOTTISH companies are roping NHS and council workers into veiled tax avoidance schemes that could see them hit with big unexpected tax bills.
HMRC recently named tax avoidance schemes run by two Scotland-registered businesses used by recruitment agencies to pay temporary workers.
These “umbrella firms” can act as legitimate middlemen between freelancers and their often multiple employers. But more than 100 have promoted tax avoidance schemes to workers, according to HMRC.
They include Glasgow firms T.U Pay Limited – whose users HMRC has “reason to suspect” are working in local councils and the NHS – and Umbrella Contracts Limited.
HMRC’s analysis found that in recent years, umbrella firms promoting tax avoidance have been used by hundreds of thousands of workers across the UK and deprived the state of hundreds of thousands of pounds in tax revenue.
Scotland’s biggest trade union, Unite, told The Ferret it hears from workers harmed by umbrella tax avoidance schemes “every single week”, in what it described as a “blatant attack on workers’ pay”. It wants the UK Government to ban umbrella firms outright.
Tax campaigners argue that HMRC’s current enforcement methods rarely result in a criminal prosecution, and fail to deter tax avoidance. HMRC must pursue “consistent and frequent enforcement against perpetrators”, they argue.
HMRC said it warns workers about “the dangers of getting caught up in tax avoidance” and is cracking down on the umbrella companies promoting these schemes “with all the powers at our disposal”.
Tax avoidance involves the use of legal loopholes to pay less tax, and is legal. Tax avoidance schemes from umbrella firms typically involve workers being paid part of their salaries under the guise of payments, such as non-repayable loans.
Some workers – often those on minimum wage – were led to believe these payments were non-taxable, and would therefore lead to higher take-home pay.
But HMRC considers the payments to be taxable, and it can demand that workers pay the missing tax, for which they are personally liable.
In March, Sky News reported that tax avoidance schemes from umbrella firms were linked to 10 workers who took their own lives after being hit by large and unexpected tax bills.
On July 31, HMRC published the names of Umbrella Contracts Limited and T.U Pay Limited (TUPL), which it said had promoted tax avoidance schemes.
T.U Pay Limited (TUPL) paid its workers in two parts, one of which did not deduct income tax and national insurance contributions (NICs). HMRC said it has “reason to suspect that TUPL users are working in local councils and the NHS”.
Umbrella Contracts Limited (UCL), which was registered at addresses in Inverness, Dumfriesshire and Glasgow, is now in administration. It recruited workers and paid them minimum wage salaries with income tax and NICs deducted.
But around the same time, another firm, Fairview Administration Services Ltd, made larger payments to workers – branded as “financier loans” – without deducting income tax and NICs.
HMRC said Fairview claimed it was instructed to do so by a company incorporated in the Seychelles – a tax haven where corporate owners are allowed to hide their identities.
In 2023, HMRC outlined another UCL tax avoidance scheme where it had another firm pay part of workers’ salaries via a payment labelled as “commission”, which did not include income tax or NIC deductions.
UCL was founded by British businessman David Corkill in 1996, according to his LinkedIn profile. Corkill resigned his UCL directorship in 2021.
The businessman, who The Ferret understands has a home near Gretna, Dumfriesshire, has previously listed addresses in Fife, and the British tax haven of the Isle of Man. He is also a director of Carlisle firm, Jeceris Limited, which was named as a promoter of a tax avoidance scheme by HMRC in 2022.
Another company, Charteris Management Ltd, of which Corkill resigned as a director in 2021, was listed as a promoter of the same scheme.
Corkill was a director of the Trade Association of British Umbrella Companies until 2022, and currently directs ERA Services, which claims to “certify UK companies as recognised places of employment excellence”.
ERA is “benchmarked by current employment law”, allowing employers, including umbrella firms, “to demonstrate with confidence their compliance with a certification that is scrutinised by a government-appointed third party”, its website alleges.
Another Glasgow umbrella firm, Paystone Services Limited – which is unrelated to Corkill – was named by HMRC last year. Paystone, which also used the name Artifact Services, paid health, tech and energy workers in two payments, one of which was labelled as “share payment” or “option payment” with no deductions made.
HMRC found that in 2022 and 2023 alone, some £200 million in tax revenue was lost to disguised remuneration tax avoidance schemes, almost all of which was facilitated by umbrella companies.
Over the same period, at least 275,000 workers used umbrella firms that failed to comply with their tax obligations.
Steven Dillon, Unite the Union’s regional coordinating officer, said he receives reports from members who have been duped by tax avoidance schemes from umbrella firms on a weekly basis.
Scotland’s construction sites are filled with contracted workers who should be legally considered employees and be entitled to the same employment benefits as staff, he claimed.
“The umbrella tax scam is a blatant attack on workers’ pay,” said Dillon. “Construction workers are being paid the national minimum wage, with the rest of their income disguised as dodgy expense claims, which we are told are often fraudulent.
“Agencies and contractors are also shifting their own National Insurance liabilities onto the workers. These umbrella companies should be abolished. Workers should instead be paid either through standard PAYE systems or as genuinely self-employed.”
HMRC last year announced plans to move the responsibility to account for Pay As You Earn (PAYE) – through which most people pay income tax – from umbrella firms to recruitment agencies from April 2026. Where there is no agency involved, the end client will be responsible for PAYE.
A spokesperson for the investigative think tank, TaxWatch, said: “HMRC already has a range of powers to tackle tax avoidance schemes (such as umbrella schemes) and providers of these schemes.
“Although fines are currently levied against some providers, these are too small to act as a deterrent and HMRC’s enforcement rarely results in a criminal prosecution, which means that many of the offences on the statute book lose their deterrent effect.
“TaxWatch welcomes HMRC’s proposals to increase the fines that can be imposed, but the key to tackling these schemes is consistent and frequent enforcement against perpetrators so that the industry knows that these models will not be tolerated.”
Backbench Labour MP Lloyd Hatton, a member of the All-Party Parliamentary Group on Anti-Corruption and Responsible Tax, said: “British-based firms should not be profiteering from tax avoidance schemes; nor should they be making use of British tax havens to do so. It’s that simple.”
He added: “So, it is essential that HMRC consistently cracks down on those rogue firms that make a fortune enabling aggressive tax avoidance.”
In July, the UK Government published draft legislation which would make failure to disclose tax avoidance schemes to HMRC a criminal offence. The laws would also give HMRC stronger powers to probe those behind promoter organisations, and new means to tackle legal professionals involved with promoting tax avoidance.
An HMRC spokesperson said: “We are focused on disrupting promoters of suspected tax avoidance and we are tackling non-compliant umbrella companies with all the powers at our disposal.
“We warn people of the dangers of getting caught up in tax avoidance schemes and as part of that work have published details of more than 170 schemes and named more than 170 promoters on GOV.UK.”
David Corkill and ERA Services did not respond to requests to comment. T.U Pay, Faiview Administration Services, Jeceris, Charteris Management, the Trade Association of British Umbrella Companies and Paystone Services could not be reached.
