A tax avoidance promoter whose schemes were used by locum doctors and nurses faces a £900,000 penalty for failing to co-operate with HM Revenue & Customs.

In a statement on 22 March, HMRC said IPS Progression Limited (IPS) paid their 1,593 scheme users largely with tax-free loans between April 2016 and April 2018. Some of the workers were locum doctors and nurses whose services were made available by recruitment agencies to hospitals and other healthcare providers.

HMRC brought the legal action against IPS for failing to notify HMRC of its arrangement until April 2022 and a judge at First-Tier Tribunal has determined they must now pay a penalty.

The tribunal judgment said the hourly rate for the contractors’ services went to IPS who took a 15% cut. IPS issued payslips to the workers showing the remainder was split in three parts:

  • “Salary paid”: This part equalled the national minimum wage for the hours worked
  • “Rolled-up holiday pay”: This was 12.07% of the “salary paid” amount.
  • “ILO bonus”: This was whatever was left of the payment.

IPS would only deduct Income Tax (IT) and National Insurance Contributions (NICs) from the “salary paid” and “rolled-up holiday pay” portions, but not the “ILO bonus” part.

IPS claimed they ’envisaged’ the employees would eventually repay the ’ILO bonus’ loans and these would have been subject to IT and NICs.

Judge Christopher Staker disagreed, saying: “The Respondent never intended to establish a genuine bonus scheme and never intended that the loans would be repaid. The practical effect was that employees were paid part of their taxable earning tax-free”.

Jonathan Smith, HMRC’s Director of Counter Avoidance, said: “This penalty underlines how IPS were prepared to ignore their legal obligations and we are pleased the tribunal agree a significant penalty is due in this case.

“We use all powers available to ensure penalties are collected. This can include making company directors liable.

“We would urge anyone who thinks they have entered a tax avoidance scheme to contact us as soon as possible to get help.”

Nigel Huddleston MP, Financial Secretary to the Treasury, said: “These schemes can cause life-changing damage to people who get involved with them, so I am making it my priority to support HMRC in using all powers available to clamp down on avoidance promoters: whether it’s through fines, legal challenges or stop notices.

“HMRC now has the powers to seek disqualification and pursue new criminal sanctions through the courts.”