HMRC recently highlighted the pitfalls of some comparison websites for umbrella companies. In their ‘Spotlight’ number 55, they highlight the dangers of selecting an umbrella company in this way.
Whilst many umbrella companies are tax compliant (such as those accredited to the FCSA such as Clipper Contracting Group), there are many companies pitting themselves under the term ‘umbrella’ that operate by promoting tax avoidance schemes that are often too good to be true.
These tax avoidance companies often advertise themselves on comparison websites by claiming to allow the worker a higher take home pay and little or no margin for their services. Some of these companies are based offshore, some use clever mechanisms to avoid paying employment costs and some simply disappear after a year of trading, owing HMRC thousands of pounds.
You could be at risk if you use one of these companies that promotes tax avoidance; you are legally responsible for your tax affairs, including paying the correct tax and NIC contributions. You only have to google ‘loan charge repayment’ for reams of articles on other unfortunate workers that are now having to pay back thousands of pounds in unpaid tax.
What to look out for
If you are selecting an umbrella company from a comparison website, consider the following:
· Do they have a UK address? (an overseas address could be an indication of different tax arrangements)
· Are they a UK company with a company registration number?
· That an example of your pay shows tax and NIC deductions on all income
· If one part of your payment doesn’t appear on your payslip, it may indicate no tax and NIC contributions are being paid on that part of the income
· Take home 80-90% of your pay – if it’s too good to be true, it’s likely to be non-compliant!
· Statements such as ‘HMRC compliant’ or ‘QC approved’ – HMRC does not endorse any umbrella company
Why you should choose an FCSA accredited umbrella company
If you are selecting an umbrella company for the first time, you won’t go far wrong by considering an FCSA accredited member. This group of umbrella companies offer only legitimate employed and self-employed solutions that are vetted through a rigorous audit process.
Clipper Contracting Group has this accreditation, so you can rest assured that all your tax and NIC liabilities will be taken care of correctly, leaving you free to go about your work with peace of mind.
Call us today on 01305 233170 for an example breakdown of payment for your upcoming assignment.
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