HMRC has sent tax avoidance letters to households (Image: Getty)
HMRC is sending letters with surprise tax bills to as many as 700,000 people in a clampdown on tax avoidance schemes.
HM Revenue and Customers is warning that taxpayers who previously used tax avoidance schemes which sometimes saved hundreds of thousands of pounds in tax must now settle what they owe.
In a letter received by one taxpayer being supported by compliance specialists Qdos, a worker was told that because their arrangements are not covered by the Loan Charge review, they remain liable for unpaid tax arising from participation in what HMRC considers to be a tax avoidance scheme.
HMRC has requested that individuals settle these liabilities, although it has confirmed that recipients retain the right to appeal its rulings. The move has raised fresh concerns about HMRC’s ability to police tax avoidance schemes operating under the guise of compliant umbrella companies and therefore posing a threat to some 700,000 workers who operate this way, says Qdos.
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In a bid to combat tax avoidance in the sector, the government has committed to regulating the umbrella industry in 2027, while umbrella tax reforms were also introduced on April 6, 2026. It has also recently come to light that the government has spent £186m to collect just £44m in tax from individuals impacted by the Loan Charge in the past six years.
Seb Maley, CEO of tax insurance provider, Qdos, said: “HMRC’s latest action highlights an ongoing issue that has left many flexible workers exposed to huge and unexpected tax bills. While enforcement is clearly intensifying, it also underlines a broader failure to put a stop to these schemes in the first place. After all, thousands of people have unknowingly fallen into the trap of working through a tax avoidance scheme.
“As part of this crackdown, HMRC is often pursuing vast sums in tax because an umbrella worker has, in its eyes, worked through a tax avoidance scheme. But while HMRC is encouraging immediate payment, our advice is to seek expert advice to understand your options before proceeding.
“The real worry in one case is that HMRC had previously said this worker had nothing to worry about. Fast forward a year or two, and the tax office returns with a letter demanding tax that this person is said to have avoided. How do people know where they stand?”
As a result, Qdos has urged flexible workers to look carefully for the signs of a tax avoidance scheme and steer clear of them:
Convoluted payment structure (if an umbrella company), which can involve offshore loans
Government’s crown logo/HMRC branding on their website (intermediaries aren’t legally allowed to display this)
Claiming to be ‘HMRC approved’ (HMRC doesn’t endorse or approve intermediaries)
Unclear terms and conditions
HMRC has confirmed it has written to all ‘disguised remuneration customers’ following the announcement of the Loan Charge Review, and told them whether their situation would be considered in its review. It added that the estimated tax gap from marketed avoidance sold primarily to individuals has fallen from an estimated £1.5billion in 2005-06 to £200m in 2023-2024.
HMRC said that new rules from April 2026 will make businesses that use umbrella companies responsible for ensuring that they comply with their PAYE obligations, and the change will prevent non-compliant umbrella companies, including those using disguised remuneration schemes, from accessing the temporary labour market, which is forecast to protect around £2.7bn up to and including 2030-31.
An HMRC spokesperson told the Express: “Following the 2025 Loan Charge Review, we are working with customers who’ve used disguised remuneration schemes to help bring their cases to a close.”