Too Good To Be True?
As the old saying goes, “If it sounds too good to be true, it probably is”. Never has this saying been more on point than the current situation some locum Social Workers now find themselves in.
For many years social workers have used their own PSC (ltd company) to provide their services on a locum basis to local authorities but that all but stopped last year when HMRC introduced their changes to the IR35 legislation. I won’t bore you (again) with those details, as this topic has been at the forefront of many conversations for a long time! You may recall I wrote a blog last year, “Uncompliant Umbrella Companies: A Change In The Law” which detailed not only the IR35 changes, but the introduction of the Criminal Finances Act. Indeed, last year was a massive show of intent from HMRC and their huge push to tackle tax avoidance – and rightly so.
We have voiced many articles and blogs to try and help social workers understand how to spot the uncompliant umbrellas from the good and in turn created our own PSL of carefully selected partners to work with. But just 2 weeks ago, the Times reported that one of our competitors had continued to ignore these warnings from HMRC that facilitating tax avoidance will not be tolerated.
One of the big concerns I have when talking to locum staff about umbrella companies is that there is still a push to look for the highest possible take home pay, regardless of what scheme or tactics are being employed to achieve that. Don’t get me wrong, Social Workers are worked to the Nth degree and the job has always and will always be extremely tough. But the facts are, the basic rate of tax in the United Kingdom is 20% and with most locum staff earning in excess of the lower tax bracket, that will push them into higher levels of tax being deducted. So surely, if you are quoted by an umbrella company to be taking home 85-90% (or more) of your pay, you’d think that maybe that isn’t quite right.
Trust your instincts and heed the advice from your trusted recruitment agency partners. It really upsets me to hear locum staff receiving demands from HMRC for unpaid tax, because just one year of using a loan scheme or similar tax avoidance methods can see tax bills as high as £16,000! I don’t know about you, but I certainly wouldn’t have that sort of money lying around to get me out of hot water.
Please don’t ignore the press that is warning you and if you need any further advice, refer to the HMRC Spotlight website to help you make your decisions.