Government consults on regulation of umbrella companies.

The Government is now consulting based on recommendations in the Good Work Plan to establsh a new single enforcement body for employment rights. This consultation will also look at the possibility of one single enforcement body that will inevitably look at the regulation of umbrella companies.

The consultation will consider the creation of a new single enforcement body responsible for enforcing employment rights which will include the regulation of umbrella companies. This type of arrangement has worked in other countries and the Government will now look to see if similar measures can be applied in the UK.

The proposal is that the new body would combine the responsibilities that currently sit under the Director of Labour Market Enforcement’s remit. This includes the enforcement of national minimum wage currently carried out by the HMRC, domestic regulations relating to employment agencies, licenses to supply temporary labour in high risk sectors, and labour exploitation and modern slavery related to worker exploitation.

The consultation also suggests that the department will have new responsibilities in relation to umbrella companies and holiday pay for vulnerable workers.

The government aims to deliver on the following:
Extended enforcement particularly in the areas of umbrella companies and holiday pay, which are not currently enforced;
A strong, recognisable brand making it easier for individuals to know where to go for help;
Better support for businesses through development of guidance;
Coordinated and consistent enforcement action;
Greater sharing of intelligence, and;
Closer working with other enforcement partners.

The Government are asking for feedback on the consultation with views being sought on whether the new body should include responsibilities in relation to statutory sick pay breaches, the Equality and Human Rights Commission in relation to discrimination and harassment and BEIS in relation to the enforcement of employment tribunal awards.

The consultation closes on 6 October 2019.

What should I do if I disagree with my end client’s IR35 determination?

It appears in light of the changes to IR35 due in April 2020 that some major engagers of contractors have already made policy decisions that all off payroll roles will be deemed to be inside IR35. And here it all starts… So what should I do if I disagree with my IR35 Determination?

Public statements indicate that HSBC, Morgan Stanley and M&G Investments, have already decided that this will be the case with their IR35 Determination and no doubt we will see other organisations reviewing their positions very shortly.

So is this “blanket approach” being pushed by the limited timescales before the legislation becomes law so that the clients can reduce financial risks? If that is the case, it is likely to be an attractive proposition.

Many end clients may take this as the easy way out but HMRC have stated that this approach would be frowned upon.

The legislation provides you with an opportunity to appeal the decision to the end client if they determine that the role falls within IR35, but you (and/or your agency) do not believe it should be! This gives you an opportunity to put forward your case, but how this will work in practice is unlikely to be something contractors will feel at ease with.

To make the appeal you are required to make representations on why you believe the decision is wrong. The end client then has 45 days to tell you either:
The original determination is upheld;
or
Give you a new status determination.

If the end client fails to respond within 45 days, the liability for tax and NIC reverts to them.

Will changes to IR35 see Umbrella Company usage soar?

It appears as we move towards the April 2020 IR35 Private Sector changes that many recruiters anticipate umbrella company usage to soar ahead of the implementation.

The research comes from a survey ran by the Association of Professional Staffing Companies (APSCo). The results showed that 91% of agencies polled believe that an increasing number of contractors will shun personal service companies (PSCs) and turn to umbrella companies due to the new rules that come into effect next April causing umbrella company usage to soar.

When the same group were asked if they expect most of their contractors to agree to working ‘inside’ IR35 after the changes come into effect, two thirds (67%) said ‘no’.

So with only 8 months left before the changes are brought into force, could we see a rise in umbrella companies? Could we see other schemes appear that will no doubt leave contractors in trouble under the Loan Charge scheme?

The simple answer is yes! Umbrella companies will appear and some companies will suggest they have found loopholes in the legislation which will benefit the contractor. But we all know that it would be more beneficial for HMRC to see as many people under employment taxes as is feasible. More monies and less work! But fundamentally the changes simply place the onus on the end client to make the decision of the IR35 status, so if you are able to prove to the client that your working practices place you outside IR35 then there shouldn’t be a problem – surely? However, if we look at the Public Sector changes then we can place a good guess that many companies will opt for blanket decisions.

HMRC have stated that they will frown on blanket decisions, but whether this will be the case who know’s. Do they have any incentive to investigate when the coffers are being lined with full employment taxes? We shall see…

Disguised remuneration: tax avoidance using capital advances, joint and mutual share ownership agreements

HMRC have published Spotlight 53; ‘Disguised remuneration: tax avoidance using capital advances, joint and mutual share ownership agreements’.

The aim: to ward off individuals participating in schemes that avoid Income Tax and NIC this time via capital advances and complex offshore joint (or mutual) share ownership arrangements as disguised remuneration.

The contractor becomes an employee of an “umbrella company” or a connected entity, such as an offshore company and signs a Loan or capital advance agreement. Alongside this they also sign a Joint/mutual share ownership agreement.

Any monies received by the contractor are made as two separate payments, with a nominal salary with little or no tax and NIC’s paid. The second payment is a weekly or monthly loans detailed as a ‘capital advance’.

The employer company then undertakes various share transactions involving an offshore joint/mutual share ownership trust. These happen to not provide any financial gain to the employee, but the shares may provide a dividend for the employee.

In Spotlight 53, HMRC says that this is an attempt to ‘dress up’ employment income to purposely avoid PAYE, Income Tax and NIC.

Involvement in one of these types of scheme means the contractor will be liable for taxes and NIC’s on the value of the loans received, interest and penalties. For transactions post 14th September 2016, a General Anti-Abuse Rule (GAAR) penalty of 60% but only where if GAAR applies.

HMRC’s advice to those people is to settle now to avoid a future investigation and increased liabilities.

Spotting these tax avoidance schemes…

Some contractor loan schemes involve giving you some or all of your payment in the form of a loan that you’re not expected to pay back. It’s diverted through a chain of companies, trusts or partnerships and you’ll be told this is to save you tax. The scheme promoter claims there’s very little risk to your investment.

What if HMRC has given it a Scheme Reference Number?

This is where HMRC has identified the arrangement as a potential tax avoidance and are investigating it. Any contractor working via one of these schemes will be been given a Scheme Reference Number (SRN) by the promoter and it must be included it on your tax return. Having an SRN does not mean that HMRC has ‘approved’ the scheme.

MPs and taxpayers on retrospective loan charge payments

Anger is growing among taxpayers facing large demands from HMRC over their loan charge repayments. Following up on a previous Politics Live report into the campaign, reporter John Owen looks at how some people are coping, or not, with paying back the money they are now said to owe.

UK viewers can watch the full programme here for 30 days from transmission.

Excerpt from https://www.bbc.co.uk/news/av/uk-politics-49032605/mps-and-taxpayers-on-retrospective-loan-charge-payments

Taylor Review: Consultation on the establishment of a new single labour market enforcement body in the UK

Since the publication of the 2017 Taylor Review of Modern Employment Practice, The Good Work Plan is back in the news again. The government has launched a consultation to consider the case for a new single labour market enforcement body.

The reasoning behind this consultation on the original Taylor Review is the government’s recognition that “effective enforcement plays a vital role in giving individuals the confidence to challenge employers where they are denied their rights and it creates a level playing field between businesses”.

As with the original report the focus will be on protecting the most vulnerable workers’ employment rights.

Could this be a welcomed change for compliant umbrella companies?

The proposal is that a new single labour market enforcement body would deal with the National Minimum Wage (currently enforced by HMRC); employment agency regulations (currently enforced by the Employment Agency Standard Inspectorate); umbrella companies; licences to supply temporary labour in high risk sectors e.g. agriculture and the fresh food chain (currently enforced by the Gangmasters Labour Abuse Authority); labour and worker exploitation; and holiday pay for vulnerable workers.

The consultation closing date is 6 October 2019. Find out more here.

IR35 & Small Companies Exemption

What is the small company exemption?

In October 2018 the Government confirmed the April 2020 private sector extension of the off-payroll rules with IR35 small companies exemption.

The Budget documentation contained an exclusion for small companies stating they will be exempt. This should minimise administrative burdens for the vast majority of engagers! HMRC have also stated that they will provide support and guidance to those affected by the changes ahead of implementation.

So does the “IR35 small companies exemption” mean?

The Government confirmed that it will use the same criteria contained in the Companies Act 2006.

A business is deemed to be a ‘small’ company if it meets 2 or more of the following criteria over any annual period:
Turnover is no more than £10.2 million
Balance sheet total is no more than 5.1 million
Number of employees are 50 or less

Any contractors engaged by such companies will continue to operate the IR35 rules as they do currently. In this scenario the responsibility for determining their employment status will not pass to their clients.

The Companies Act rules allow for a small subsidiary of a large group to be classified as small – this would get around the rules, allowing large end users to form small, exempt subsidiaries. But HMRC are not stupid are believed to be putting in anti-avoidance rules to counter this.

Loan charges and the impact on contractors struck by this retrospective tax.

Loan charge ‘left me with a sense of dread’ IT contractors, oil and gas workers, locum doctors, social workers and nurses who took advice from accountants, recruitment firms and tax advisers face unexpected tax demands.

Excerpt taken from BBC on 15 May 2019, watch here.

Top work email mistakes revealed!

Next time you write a work-related email, it’s worth ensuring that you don’t make one of the top errors listed in a recent survey. The data, compiled by job board CV-Library, surveyed 1,100 UK workers to find out their views on workplace emails.

Interestingly, 73.2% said that they believe that they continue to remain professional when communicating via email – no matter who they’re being sent to, however, from the survey came a list of the worst email mistakes.

This included:
Sending inappropriate content (90.7%)
Sending kisses (64.6%)
Not addressing people by their name (43.8%)
Not signing off an email correctly (38.7%)
Blind copying people into the email (29.1%)
Copying in a manager just to get a response (16.6%)
Sending read receipts (11.5%)
Flagging the email as high importance (10%)

Lee Biggins, founder and managing director of CV-Library, commented, “It’s no secret that sending inappropriate content over email is a no-go in the workplace. That said, it’s interesting to hear that other small common occurrences are bugging UK workers, not to mention the fact that the majority appear to take a more formal approach to their communications. “It’s always important to remember that the workplace is a professional environment, and while interaction through technology is increasingly becoming more and more instant, the traditional rules still apply.”

Rise in construction projects could lead to further job opportunities.

Umbrella company contractors working within the construction sector will be pleased to learn that projects in the industry have seen considerable growth, which could in turn result in further job opportunities.

The recent Economic & Construction Market Review by Barbour ABI, has revealed that during August, the number of new construction projects saw an increase of 20% with residential work helping to create the majority of these contracts last month and accounting for £2.7 billion – the highest recorded figure since Barbour ABI started its reviews.

Data also showed that it was London that reported the highest value project last month, which was for 1 Park Place and the Wembley Park residential development. Michael Dall, lead economist at Barbour ABI, commented on the latest review, “The construction sector can once again be thankful for the strong showing of the residential sector, which provided £1.8 billion more than any other sector in August, along with an increase of 55 per cent compared with August 2016. “It is encouraging to see the number of projects increasing steadily, particularly the larger projects from the commercial and retail sector.

However a lack of investment in infrastructure across August and for the most part of 2017 is not encouraging, as we haven’t seen many major projects come to fruition, especially after it was highlighted as a Government priority earlier in the year.”