HMRC have announced that they will be investigating a number of issues surrounding umbrella companies. They will be scrutinising umbrella companies who flout the rules as indicated in their recent brief (50/09).

The issues of concern detailed in this brief are:

  • Potentially ineffective overarching employment contracts
  • Dispensations which are invalid, or which have been wrongly applied
  • Not complying with the terms of the dispensation
  • ‘Expense payments’ made tax-free without that level of expense, or in many cases any expense, having been incurred
  • Potential illegal deductions from workers’ pay
  • Ineffective and sometimes unlawful management processes
  • Breaches of national minimum wage

Speaking to Shout99, Bob Jones, an ex-Revenue Inspector and Shout99 expert had this to say: “Last year HMRC published a consultation document regarding umbrellas. I was convinced that HMRC were going to introduce legislation to make umbrellas, at best, a less viable alternative. In my response via Shout99 I suggested that some of the problems with umbrellas were of HMRC’s own making because of, amongst other things, a lack of staff awareness and failure to use existing powers. In the end HMRC announced their intention to use their existing powers [50/09] is the end result of that decision.”

He continued, “There are some umbrella companies without robust overarching contracts, without adequate checks that expenses have been incurred, without adequate audit trails where expenses have been incurred and using salary sacrifice to pay below the minimum wage. Those responsible umbrellas who comply with all their legal obligations simply cannot compete with those who do not. Compliant umbrellas will welcome this approach by HMRC. Non compliant umbrellas will be expected to make good all tax, NIC together with interest plus all conceivable penalties that HMRC can charge.”

Recent Posts

Leave a Comment