HMRC does not receive praise often, but by acting to prevent contractors from inadvertently entering into agreements leading to tax avoidance, it has done these workers a good turn.

Some tax avoidance scheme promoters advertise extravagant claims of being able to legally save contractors from paying large amounts of tax. HMRC has had some recent successes in challenging advertisements that appeared on William Gordon Ltd’s website, which offers contractors financial advice.

The home page headlines promised contractors who used a certain scheme that they would take home up to 92 per cent of their pay. They also claimed that the solution was legally robust.

The webpage said: “We are fully complaint with the necessary HMRC legislation and with all current IR35 policies. We also ensure that you remain tax complaint for the duration of the Contract.”

Such claims were not legitimate. According to HMRC, the scheme involved the contractor being engaged by an umbrella company, which would invoice the end client and keep its ten per cent. The contractor would then receive a salary below the NIC and tax threshold limit so that the umbrella company would pay no NIC or tax. Afterward, the contractor would receive the balance as a loan on terms that meant that repayment was unlikely.

HMRC reported the adverts to the Advertising Standards Authority (ASA) on three grounds. First, the scheme did not comply with tax and NIC rules. Second, it did not warn members of the public about the risks of the scheme, and finally, it did not make clear that the scheme involved tax avoidance.