Closing in on promoters of tax avoidance

The government is seeking views on proposals in four areas:

• expanding the scope of the Disclosure of Tax Avoidance Schemes (DOTAS) regime.
• introducing a Universal Stop Notice and Promoter Action Notice
• tackling controlling minds and those behind the promotion of avoidance schemes through new highly targeted obligations and stronger information powers
• exploring options to tackle legal professionals designing or contributing to the promotion of avoidance schemes

We do not offer detailed comments on these specific proposals because we believe the issue of Disguised Remuneration (DR) is better understood—and more effectively addressed—through a different lens.

DR, in many instances, is not driven by traditional avoidance motives on the part of individuals, but rather by umbrella companies deliberately avoiding their PAYE obligations to reduce costs. These cost savings are often passed along the supply chain or used to increase margins. In some cases, the manipulation of pay and taxes occurs behind the scenes, leaving workers unaware of their involvement in DR arrangements.

This distinction is crucial as it means that the solution does not lie in changing taxpayer behaviour or pursuing promoters, but in addressing the structural use of PAYE avoidance within supply chains. That means identifying who benefits and reshaping behaviours and incentives accordingly. This is precisely the direction of HMRC’s 2023 umbrella company consultation work, which rightly refocuses everyone concerned on the correct operation of PAYE.

Given this context it is surprising to us that these umbrella company proposals—framed as aimed at the same £500 million DR tax loss—are mentioned only briefly in one paragraph of an otherwise extensive consultation with 60 questions. In fact, it almost feels as though HMRC are addressing two separate issues.

We are concerned that there is currently no coherent, joined-up strategy for tackling DR. This poses significant risks. We believe it would be helpful for HMRC’s counter avoidance and other relevant teams to now publish a joint strategic paper outlining their shared approach to DR and umbrella companies. This paper should clearly set out how policy and compliance functions will collaborate after April 2026.