Uncompliant Umbrella Companies: A Change in Law
When the IR35 changes were made in the public sector in April 2017, many public sector workers including lots of Social Workers felt that a huge weight had been put onto their shoulders. The weight of HMRC trying to make up a huge void in unpaid or avoided tax which was created in part by the confusion around IR35 and running a PSC when it was first introduced in 2000. After months of finding their feet, after these changes, another very real threat has emerged - Umbrella Companies appearing as if by magic, offering the holy grail.....90% take home pay! Now you might be thinking, "Yes! My prayers have been answered!" but believe me, this couldn't be further from the truth.
Most people know, or should, that the UK basic rate of tax is 20% and so the more you earn, that banding moves into a higher rate of tax. So how on earth can an Umbrella Company tell me I only have to pay 10% tax? One answer......Tax Avoidance. These schemes come in many forms with "grey areas" and "loop holes" touted to try and uphold their compliance with HMRC. The truth is, if you are using an Umbrella Company that pays you a small hourly rate or weekly wage, which is then topped up by a bonus, commission or even a loan - you could be in trouble. If any of this sound familiar, head over the HMRC website and search "Spotlight" where you can find more information.
The safest way to work and ensure that you are paying the correct taxes (and avoid a tax bills and penalties) is to use an FCSA accredited Umbrella Company. These Umbrella's have been audited to ensure they are making the right decisions and that you pay all of the right taxes to the Government. Here at Sheldon Phillips, we have created a small PSL of FCSA accredited Umbrella companies, so you can be sure that whatever money you take home at the end of the week, is yours to spend without fear of any wrong doing.
A Change in the Law
You may have noticed that Recruitment Agencies have recently started to create PSL's of Umbrella Companies and have even asked you to change your current Umbrella. This is because from 30th September 2017 a new criminal offense: Failing to prevent Tax Evasion was introduced. Simply put, and without getting into too much legal jargon, this focuses on Recruitment Agencies or intermediary's in the chain to ensure that the contractor is paying the correct tax and national insurance contributions. So in short, if an agency allow you to knowingly use a provider that evades paying correct taxes, they can be subject to huge fines and even a prison sentence!
At Sheldon Phillips, we have taken the decision to create a small PSL of FCSA accredited Umbrella Companies, to ensure that all of our contractors are safe in knowing that all of the correct deductions are being made. This list has been created through years of good service and plenty of due diligence done by Managing Director, Jamie Trick. So when you work with us, you can sleep soundly, knowing that you are 100% compliant, 100% of the time.