Here is HMRC’s latest list of tax avoidance schemes. Its not long since HMRC’s last update so they are clearly very active in highlighting these schemes and outing the perpetrators. That’s good to see, particularly if it helps stop non-compliant umbrellas and stops contractors becoming embroiled in a scheme that results in a huge future tax bill that they’re personally liable for.
We would like all umbrella companies to be compliant in their approach to avoidance of Tax and not look to encourage workers to utilise them by taking home higher amounts than they should do, by operating these schemes.
Many umbrella companies are compliant with the tax rules, but some use contrived arrangements that claim to allow agency workers and contractors to keep more of their earnings. These arrangements are tax avoidance schemes and most of them do not work.
Some umbrella companies benefit financially by using contrived arrangements like disguised remuneration to pay workers. For example, an umbrella company might want to claim that a payment is non-taxable to try to avoid paying employer National Insurance contributions (NICs) on it — currently 15.05% of the payment.
Using these non-compliant umbrella companies could leave you at risk of being involved in a tax avoidance scheme, and owing HMRC money, even if you did not set out to try to avoid tax.
You are responsible for your own tax affairs and for paying the correct amount of Income Tax and National Insurance contributions. Most tax avoidance schemes simply do not work and anyone who uses them is at risk of ending up with a large tax bill. You may also find that the umbrella company has deducted a fee (this may be called a margin) from your earnings for using their services, which could be higher than the standard fees. Any tax you owe will be in addition to this.
Under PAYE regulations your employer has an obligation to deduct tax and National Insurance contributions from your employment income on your behalf. However, where this does not happen HMRC may, in some circumstances, recover the tax directly from you.
To read more, please click here for the full article.
ePayMe is accredited by Professional Passport and is a Trusted Partner of APSCo, so if you are an agency or contractor concerned that you are utilising an umbrella that may be linked with such schemes or would like a consultative approach to your payroll, please contact us today ☎️ 01252 863700 or email us .