With news circulating almost weekly since HMRC launched their Tax Avoidance Enforcement scheme the number of non-compliant providers is currently 17 and counting.
Anyone knowingly using non-compliant providers still operating really need to consider the affects these providers have on the workforce. Potential under paid taxes could result in workers being penalised for the repayments, causing stress and anxiety in a time when the living costs are increased so additional bills are not welcomed by anyone. So the question you need to ask yourself is ‘is it really worth it’ the impact to an agencies reputation could have a detrimental effect on the business and also damage relationships with end clients.
HMRC published a warning for agency workers and contractors employed by umbrella companies and how to spot some of the tax avoidance arrangements.
HMRC stated 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.
Some umbrella companies or people promoting them claim that their tax arrangements or tax avoidance schemes are HMRC approved. HMRC never approves avoidance schemes or the compliance of any umbrella companies. Using a provider accredited by Professional Passport whom have undergone a full audit based on compliance, processes and submissions made to HMRC for Tax, NI (employees and employers), pensions and deductions made from contractor’s salary would prevent any uncertainties with their chosen payroll provider.
Tax avoidance arrangements, known as disguised remuneration schemes, involve an umbrella company giving you some or all of your pay in the form of a loan, salary advance, grant, annuity or any other payment you’re told you’re not expected to pay back. These payments are claimed to be non-taxable, often without explanation, and can lead to a higher take home pay.
You may be asked to sign an agreement with an umbrella company, in addition to your employment contract. This will often be a loan or other agreement that attempts to disguise some of the payments paid to you by your umbrella company as something which is non-taxable. HMRC have seen a rise in these arrangements with no additional agreements which makes it hard to understand if your provider is deducting the correct HMRC deductions.
Our advice to contractors
Ensure you have a contract of employment, if you are asked to sign additional documents, ensure you read and understand what the document is in relation to.
If an umbrella company offers a higher net such as 80% take home, this is likely to be an avoidance scheme.
Check your payments, if you have e received two separate payments from two different entities this could be a sign of tax avoidance. All of the payments you receive relating to your earnings need to be considered for tax and National Insurance contributions.
Some or all payments appear non-taxable, these could appear on your payslip as non-taxable loans, shares, capital payments or credit facility.
Your payslip may only show the payments properly paid through PAYE, to make it look compliant with the tax rules.
You may have been contacted by a third party about repaying a loan that you took out from a disguised remuneration scheme. In most cases, the request for repayment is because the original provider of the loan has sold the outstanding loans to a third party. In some cases, a loan may also be recalled by an insolvency practitioner.
If you have any concerns regarding how you are currently being paid, please contact us, we offer a no obligation quote based on the correct deductions so you can conduct your own comparison to your current provider.
Our advice to agencies
It is highly important you conduct your own diligence checks on your payroll providers.
Obtain consent from contractors to request copies of payslips so you can cross reference deductions.
Check their accreditations, do they hold a Professional Passport, FCSA or APSCo Trusted Partner accreditation. Never take a provider’s website as proof they are accredited, you can find a list of approved providers on accreditors websites.
Ensure you obtain company documents such as VAT certificate, companies house registration and confirmation of RTI submission.
Obtain Key information documents (KID)
Do not let your workforce fall into a tax avoidance scam. Call us for a confidential chat about how we can support your business and contractors moving forward.
Please contact us today ☎️ 01252 863711 or email us