Reading the forums on ContractorUK I came across Bob Jones recent article on the HMRC's concern over Umbrella Companies.
Bobs article is the first that I have seen that eloquently sets outsome answers to the question "Why does an Umbrella Company exist anyway?".
From the way Bob writes it is clear that a main reason an UmbrellaCompany exists is to provide a way of an employee moving from onetemporary site to another under an overarching contract ofemployment and be able to claim expenses and so reduce their taxburden, and increase their take home pay.
If you compare two workers that do four assignments in one year.Worker a) works for an agency and is paid paye. Worker B) works for anUmbrella Company and is paid paye and expenses.
In Workers A's case there are no expenses as HMRC see eachengagement as a separate and distinct employment, so just like anyemployee going to work each day there are no tax deductible expenses.
In Worker B's case there is an overarching contract of employment sothe workers is employed in one employment and works on 4 temporary worksites, hence the ability to claim expenses.
So this answers the question Why Does and Umbrella Company Exist ?, and it may not be an answer HMRC likes.
I am told by several people that HMRC like Umbrella Companiesbecause they collect and pay lots of PAYE and Tax to HMRC and do itvery well, ( that is certainly true for the ones that are compliant andefficient ).
On the other hand, if Umbrella Companies do not exist, then theAgencies or the Clients would do the PAYE collections, so really thereis not much need for an Umbrella Company.
Umbrella Companies may counter that they provide OverarchingContracts of employment, they pay minimum wages at least, they coversick pay, holiday pay and maternity pay, and even provide employmentlegislation protection. It is certain that the compliant UmbrellaCompanies do all this BUT, if you there was no Umbrella Company, thenall this would be provided by either the Agency or the Client underexisting legislation.
Back to the original question, then. Apart from a tax advantage thenwhy does an Umbrella Company exist ? Well its difficult to come up withany real answer , is it not ? ( Please let me know if I have missedsomething....).
One concern I have is this is really the same for what was known asComposite Company operators. They existed to provide a tax advantagefor the worker over other employees. The good Composite Companyoperators were efficient, paid the taxes under the rules and appliedthe rules correctly. There were also some other composite companyoperators that bent the rules and caused HMRC some problems.
The Managed Service Company regulations took away the CompositeCompanies not by saying you could not be one, but by removing any taxadvantage of a worker working through a composite company. Thelegislation also put a huge responsibility on the agencies so that itwas too much of a risk for any agency to recommend workers to use acomposite company.
HMRC have gone through a consultation process on the expenses issuefor Umbrella Companies, have identified that they have issues that theywant to do something about, and have issued a stern warning to theindustry that they are going to do something about it.
We should expect changes for Umbrella Companies for sure.
In the meantime, for a Professional Contractor and Freelancer whoreally wants to run their own business the opportunity is there and fortheir colleagues who would rather not run their own business and be anemployee, I think they will see have to start to accept that they willbe taxed like an employee.
HMRC issued a brief lastweek which is the strongest indication yet that Umbrella Companies whoare not compliant will be the subject of targeted activity by HMRCCompliance teams.
It is also clear from the tone of their brief that StaffingCompanies and Clients that "push" workers into these arrangements thatare not compliant will need to take responsibility for their actions, Ithink this is a clear indication that HMRC will aim to get the DebtTransfer Rules applied to include Umbrella Companies.
This will that mean that Staffing Companies will be in the firingline for PAYE that these companies do not pay over and it will go someway to ensure that Umbrella Companies that are not compliant will notbe tolerated by Staffing Companies.
If you combine this with the possibility that under the proposedAgency Workers Directive, Umbrella Company Workers may have difficultyclaiming expenses after 12 weeks in the same contract, it is certainlytime to review Umbrella Company arrangements.
Shout99report on this new initiative by HMRC with Bob Jones advising thatcompliant Umbrella Companies have nothing to worry about and willwelcome this compliance activity.
Dave Chaplin at Contractor Calculatoralso writes about this new HMRC Brief and Kate Cottrell comments thatwe can see signs of joined up thinking at HMRC especially in light ofthe proposed changes in legislation for construction industry workers that we wrote about a few weeks ago.
Kate Cottrell's view quoted on Contractor Calculator is thatincreased compliance activity and the potential loss of expenses toUmbrella Company workers will not lead to a mass migration of UmbrellaCompany workers to Limited Companies.
I think this view should be put in the context of the recent casesresulting in potential employment rights of Inside IR35 workers that wehave written about consistently, these cases lead us to the view thatClients and Staffing Companies are now more inclined to agree termsthat are genuinely outside IR35 , to protect themselves againstemployment rights threats.
This may mean that many more Umbrella Company workers will look atif running their own business as a Limited Company is a better option.
So, lets look at the opportunities here !
They certainly exist for a Professional Contractor and Freelancerwho wants to run their own business and trade through a Limited Company.
1. You can offer your client and agency no problems from complianceor Debt Transfer Rules . To achieve this you need to have a Ltd Companyset up before you go to the Staffing Company or Client to negotiate acontract.
2. You can offer your client no risk from employment rights . Toachieve this you need to negotiate a contract outside of IR35, acontract for services. See our detailed guidance on IR35.
So the time apperas to be right for anyone considering running theirown business as a Professional Freelancer and Contractor, and if youare an Umbrella Worker than this may be your opportunity for a change !
Since the launch of the MSC regulations in the Pre Budget report of December 2006 HMRC has publically stated its stance on:-
The ICAEW also published some comments inDecember 2008 about who could fall foul of the MSC regulations, and theProfessional Contractors and Freelancers that would be "hit" first whenusing one of the available "Offshore Solutions"; for anyoneconsidering using one of these schemes these comments are worth a read.
It is worth remembering that HMRC are very well informed about theservices on offer to Professional Contractors and Freelancers and havetwo specialist teams called SCU's , Service Company Units basedin Taunton and Sheffield. These two teams deal with Umbrella Companies,MSC's, IR35 and Agency Legislation and their role is fully described inECH13315
HMRC has not publicised any "attacks" either successful orunsuccessful against any opperators but there has certainly been some changes in the way various operators in the market for supplyingservices to Professional Contractors and Freelancers have publiscisedtheir services.
These changes may, or may not be the result of HMRC interest in thecompany, I would not know, but I think it is useful to "keep an eye onthe market" and see the changes. Whatever the reason it shows that themarket is changing for suppliers of services to the ProfessionalContractor and Freelancer, and my own view is that HMRC are takingstrong and determined action on suppliers who are not compliant.
For true peace of mind, compliance is the key, for sure. There arestill plenty of good, legal and compliant ways to plan your tax withinthe structure of your own Limited Company, and achieve a tax efficientnet income whilst still sleeping at night.
And so to one change that I noticed recently. I wonder what changedat "Norla Consulting" ? If I remember rightly they marketed themselvesas an Umbrella Company, and now their website offersa timesheet and back office service for Staffing Companies and also suggests an Accountancy Service for Limited Company contractors thatis offered by another firm.
For research purposes you may want to do a search on the term "Norla" on the forums at www.contractoruk.com, there seems to be some suggestions on these forums that the firm wasan Umbrella Company with an EBT scheme and that HMRC had startedwriting to contractors using the "scheme" which had caused some concern.
If you are thinking about using any of these types of schemes, orhave colleagues that are telling you all about how good they are, readthese forums, read about peoples personal experiences and then make upyour own mind about your ability to sleep at night.
HMRC offer guidance on EBT's at BIM44535 and it is worth reading. The question to ask yourself is, is it worth the risk ?
ContractEyewrote a great article on Umbrella Company Dispensations recentlydispelling the myths surrounding certain Umbrella Companies and theirpractice of marketing their services by way of so called specialarrangments with HMRC that allow contractors to massively increasetheir take home pay.
In conclusion ContractEye says stay well clear of Umbrella Companiesencoraging conractors to overclaim on their expenses to increase theirtake home pay.
We have written many times about the same subject, especially sinceHMRC have stated that this is an area that concerns them and they arelooking to take action against Umbrella Companies that are flouytingthe existing HMRC legislation.
In fact we believe that HMRC has a special team that plans to managecompliance for all Umbrella Companies ( that they know about ). MostUmbrella Companies that are trying to do the "right thing" think thisis a good idea as it should encourage a level playing field for all.
Inthe meantime we still believe that Professional Contracts andFreelancers looking for a career as a freelencer for more than 6 to 12months are better off in a Limited Company, but only if they truly wantto run their own business, not that its that complicated with the rightsupport.
If you are working alongside Umbrella Company Contractors you maywant to pass this onto them so they can consider their options. Werecently posted an article aboutwhy Professional Contractors and Feelancers will always be better offin their own company and you could also download our 2007/8 comparison spreadsheet so that you can weigh up the financial advnatges of running your own business.
The recent newsletter from Umbrella Supermarket , the self styled Umbrella Company watchdog sent out their regular newsletter with a link to an article that only members can see which forecasts problems in the Umbrella Market as the recession tightens.
The newsletter which reports on the purchase of accounting firm QuayAccounting by Parasol forecasts that Umbrella Company numbers coulddecline as the recession bites and concludes with the words "If indoubt, rush out. In other words move – and quickly. It’s by far yoursafest bet" - ominous words indeed from Umbrella Supermarket.
Maybe this is a time when the big distinction between an UmbrellaCompany and running your own business is becoming even more important,and the question to ask is "Who has control over your money" .
Umbrella Companies control your money.
Professional Contractors and Freelancers using a Limited Company control their own money.
If an end client or agency goes out of business and doesnt pay, the situation is equal between the two in most cases.
In my view surviving a recession is partly to do with riskreduction and cash conservation. Professional Conractors andFreelancers who have taken the so called easy option of an UmbrellaCompany, may want to start to look at running their own business.
Luckily it is even easier now, with FreeAgent bundled in our Professional Service you can run your own business efficiently and at fees that are less than a major Umbrella Company.
Importantly, a Limited Company Inside or Outside IR35 will always (I mean always ) return more net income than an Umbrella Company payingyou expenses and paye. There are good reasons for this:-
1. Your Limited Company can be VAT registered ( You make money from this, rather than the Umbrella Company !)
2. You can tax plan more effectively as you can choose when to have your income
3. Dividends do not attract NI, your PAYE salary from the UmbrellaCompany attracts Employers NI ( 12.8%) and Employees NI ( 11%).
4. The legislation arround expenses are the same between an Umbrella Company and your own Limited Company !
5. If you run your own business quite often you can claim more ( anddifferent things ) that you can with an Umbrella Company who is actingas your employee !
6. Inside IR35 in your own Limited Company will always return morenet income than an Umbrella Company because of the 5% deduction foroverheads and all the reasons above.
Please take a look at our spreadsheet calculator that you candownload from our Business Library > Tools and Documents Folder ifyou register on our website. Just by entering your contract rate and monthly expenses you can clearly see how much you can gain.
One last point is that the decision to run your own business is notall about the money; you need to be aware that there areresponsibilities attached, but there is plenty of help at hand, andplenty to gain !
If you are already running your own business then maybe forward thisto your colleagues who are using an Umbrella Company, it is; asUmbrella Supermarket is saying, time to be ready for some changes.
If you are a client and would like any advice regarding UmbrellaCompanies please contact your Personal Accountant. If you are notcurrently a client, please feel welcome to book a free initial consultation with me.
By Phil Richards
ContractorCalculator published an interesting interview with Rob Crossland of leading umbrella company Parasol.
Following the Parasol aquisition of accountancy firm Quay Accountingin the article Rob Crossland warns of further consolidation in theumbrella market as smaller players begin to suffer in worsening tradingconditions.
Rob also belives that smaller accountancy practices will do well,but that some firms affected by the Managed Service Company legislationwill find it difficult to maintain profitability and may exit themarket alll togeather.
Finally the article suggests that the current 100+ umbrella companies in the market will contract to a core of 30 strong firms.
Its an interesting viewpoint. In light of the aquisition of anaccountancy firm its clear that Parasol can see changes in the umbrellamarket, and also its possibly true that they can see a change inattitude of their clients who are wanting a Limited Company of theirown.
Why might there be a change in attitude of the traditional Umbrella client ?
My guess is the following:-
1. The current economic climate may mean contractors who saycontracting as a temporary solution to their career can now see that itmay be a long term solution.
2. There is still concern regarding the umbrella expenses, dispensations and potential HMRC changes.
3. There is concern regarding the stability of the umbrellacompanies in the current climate, ( after all - if you are with anumbrella company they have control over your contract income !)
Here at Blevins Franks we still think that in many cases, InsideIR35 or Outside IR35, running your own business is the preferably longterm solution for Professional Contractors and Freelancers.
Here are 5 good reasons to start with:-
1. Flat Rate VAT Scheme increases your net income.
2. There are more tax planning strategies you can use with your own company.
3. Its your company. You are in control of your money. No one can take your company off you or disappear with your money.
4. There is plenty of good systems you can use to easily manage your company.
5. Fees are often lower than an umbrella company ( ours start at £40 a month !)
If you are in an Umbrella Company or have colleagues that are, youmay want to consider what to do for your next contract. Its clear to ushere that many people are beginning to question if the traditionalumbrella company continues to offer the best solution.
We have a spreadsheet that enables you to compare Limited Companywith Umbrella Company, Partenrship, Sole Trader and Agency PAYE, allyou have to do is enter your expenses and contract rate. You candownload this free from our Business Library once you register on our website .
October 13th was the deadline for interested parties to submit their responses to HM Treasury for consultation.
Several organisations commented earlier in the year their intentionto lobby HMT's consultation over travel expenses paid by an umbrellacompany; including AEMC (umbrella trade body) PCG ( Professional Contractors Group) , and SPA (Service Providers Association) to name some of them.
After much consultation the PCG have suggested four possible solutions which they will put forward to HMT.
According to an article published by contractorcalculator.co.uk these are:
* HMRC tightening-up its enforcement activities, for which powersare already in place and further legislation would not be required.
* Removing all dispensations for umbrella companies, and graspingthe nettle of defining umbrella companies in statute – a challenge asumbrellas share many characteristics with consultancies.
* HMRC providing dispensations to umbrellas that only use genuineemployment contracts as contracts of services, although this couldprove problematic with the current lack of a definition of employmentstatus.
* Altering the definition of what constitutes a ‘temporaryworkplace’, with a designated permanent workplace such as a home officespecified in expenses claims, which HMRC can use as part of theverification process when checking on compliance.
The last option would mean the 24 month rule no longer applies tocontractors and freelancers, although it would still apply to employedworkers.
John Brazier, Managing Director of the PCG commented “Freelancersmust continue to be entitled to tax relief on genuine expenses, even ifthey use umbrella companies".
“The government has pledged not to interfere with expenses forfreelancers using their own limited companies, and there can be nojustification for attacking umbrella workers either".
Sometimes it seems that only Umbrella Companies have formed actiongroups to protect the interests of their business, after all if thislegislation does come in then they may have a fair amount to lose. Eventhe PCG operate an umbrella option with a major Umbrella Company and Iwonder if that damages the perception of them as "impartial" in thisconsultation?
I still think that any professional contractor or freelancer who is genuinelyin business and using Staffing Companies to source work should beoperating through a Limited Company aiming at being outside IR35wherever possible, trading as a real business and making compliant tax savings.
The four main areas of legislation ( IR35, MSC legislation, IncomeShifting and Umbrella Expenses )introduced and being consulted on allpoint to this and draw dividing lines, albeit sometimes unclearly,between those genuinely in business and those that really are not, butstill want the benefits.
Leave those who do not want to be in business to use an umbrellaoption or working as a temporary employee of a Staffing Company. Afterall, even with the loss of travel expenses, their hourly rate is stillmuch higher than that of 'Joe Bloggs' sitting next to them doing thesame work as an employed member of staff. But of course they dont getthe benefits or protection from being an employee.
You can refer to a previous articleI wrote to see what financial impact the abolition of travel expenseswill have of those working through an umbrella organisation incomparison to those operating through a Limited Company.
October 13th was the deadline for interested parties to submit their responses to HM Treasury for consultation.
Several organisations commented earlier in the year their intentionto lobby HMT's consultation over travel expenses paid by an umbrellacompany; including AEMC (umbrella trade body) PCG ( Professional Contractors Group) , and SPA (Service Providers Association) to name some of them.
After much consultation the PCG have suggested four possible solutions which they will put forward to HMT.
According to an article published by contractorcalculator.co.uk these are:
* HMRC tightening-up its enforcement activities, for which powersare already in place and further legislation would not be required.
* Removing all dispensations for umbrella companies, and graspingthe nettle of defining umbrella companies in statute – a challenge asumbrellas share many characteristics with consultancies.
* HMRC providing dispensations to umbrellas that only use genuineemployment contracts as contracts of services, although this couldprove problematic with the current lack of a definition of employmentstatus.
* Altering the definition of what constitutes a ‘temporaryworkplace’, with a designated permanent workplace such as a home officespecified in expenses claims, which HMRC can use as part of theverification process when checking on compliance.
The last option would mean the 24 month rule no longer applies tocontractors and freelancers, although it would still apply to employedworkers.
John Brazier, Managing Director of the PCG commented “Freelancersmust continue to be entitled to tax relief on genuine expenses, even ifthey use umbrella companies".
“The government has pledged not to interfere with expenses forfreelancers using their own limited companies, and there can be nojustification for attacking umbrella workers either".
Sometimes it seems that only Umbrella Companies have formed actiongroups to protect the interests of their business, after all if thislegislation does come in then they may have a fair amount to lose. Eventhe PCG operate an umbrella option with a major Umbrella Company and Iwonder if that damages the perception of them as "impartial" in thisconsultation?
I still think that any professional contractor or freelancer who is genuinelyin business and using Staffing Companies to source work should beoperating through a Limited Company aiming at being outside IR35wherever possible, trading as a real business and making compliant tax savings.
The four main areas of legislation ( IR35, MSC legislation, IncomeShifting and Umbrella Expenses )introduced and being consulted on allpoint to this and draw dividing lines, albeit sometimes unclearly,between those genuinely in business and those that really are not, butstill want the benefits.
Leave those who do not want to be in business to use an umbrellaoption or working as a temporary employee of a Staffing Company. Afterall, even with the loss of travel expenses, their hourly rate is stillmuch higher than that of 'Joe Bloggs' sitting next to them doing thesame work as an employed member of staff. But of course they dont getthe benefits or protection from being an employee.
You can refer to a previous articleI wrote to see what financial impact the abolition of travel expenseswill have of those working through an umbrella organisation incomparison to those operating through a Limited Company.
Lets just take a moment to consider this scenario:
"Its April 2009, travel and subsistence payments paid to 'flexibleemployees' through an Umbrella Company have been abolished by HMRC."
Ok, if this happens what now for the freelancer working with a staffing company and an employee of an Umbrella Company?
According to an article published by umbrellasupermarket.com "Contractor'swon't find themselves worse off without expenses. Why? Read on.Umbrella Companies charge what they do because they have to processboth timesheets and expenses. If you take the latter out of theequation the Umbrella Company's ongoing workload doesn't just halve, itwill plummet by a massive 70%. That means the fee they charge will droptoo. Instead of paying them, say £120 per month, you should end uppaying them about £25/£30 per month".
My guess is that this article was trying to say that if you save£100 on fees, then at 20% tax rate , you could pay £100 more intax when you will not be able to claim £500 of expenses.
That means that a basic rate tax payer has been paying £125 in fees, to save £100 in tax on £500 of expenses.
In our new scenario, under these proposed new rules, the basic ratetax payer is paying £25 in fees for his employer to deduct tax on allhis income and produce a payslip showing the deduction. Its kind ofstrange when an employee has to pay his employer to produce a payslip,and award him employment rights.
Perhaps I am missing something ?
What about the impact on the Umbrella Companies themselves ?
Some Umbrella's invested huge amounts into their systems and procedures in 2007 / 2008 to comply with MSC regulations.
But if the Umrella Company is spending a lot less time working foryou; i.e in processing invoices and payslips, they will obviously haveto cut their fees. So, just how are they going to re-coup theirinvestment?
Currently, and you may not be aware of this, many Umbrella Companiesreclaim VAT on your expenses receipts (where applicable) and keep itfor themselves!
Imagine what this amounts to on just your expenses a year, let alonefor many hundreds of clients. Not processing expenses is a doublewhammy loss for many of these companies. Is there any wonder then thatthey are amassing in groups to gather information on what to do next?
So, not only will some Umbrella Companies lose all it's revenue madeon your input VAT, they might also have to cut its fees by up to 70% toretain you as a client, and the company still needs to recoup all itsinvestment in systems to manage expenses !
It is possible that some Umbrella's will fold due to financial meltdown.
Another consideration to be made is; with a drastic reduction inworkload and less fees, they will have too many staff that they employcurrently unless they increase their client base by a whopping 70% justremain standing still.
Will they have to broaden their horizons and provide additionalservices, maybe as "accountants" to limited company owners or other(offshore) schemes?
Maybe they will even turn their attention to running 'back officeservices' for staffing companies, such as payroll for example ? ( Thereare many that have already started these types of services )
Will there be any contractors that will want to use anUmbrella service when there is clearly no benefit to them if they aresimply paying a fee for a payslip (sorry, not forgetting the free PI Insurance that's added into your fee).
Maybe freelancers beleaguered by the changes in the Umbrella Companyexpenses will look at the Limited Company option if there are financialadvantages of working through an intermediary company, Ir35 or non IR35?
Will a Limited Company be any better ?
At the momment its by no means clear how these rules would beintroduced or even if its aimed squarley at Umbrella Companies andStaffing Companies paying expenses; then, what if the same legislationalso catches the Limited Company owner too ?
If HMRC opt for amending the definition of a temporary workplacethen this means that Umbrella Companies, Limited Company Owners andStaffing Company Employees will all be affected in a similar manner. (As a matter of interest so may many workers in so called permenantemployment be affected !)
But even if travel and subsistence expenses in a Limited Company arenot claimable, then Inside IR35 there is still the 5% allowance foroverheads and some money to be made from the Flat Rate VAT Scheme,which means that a freelancer can earn more money from their contract.
A possible conclusion ?
What this really means is, that if you really want to "run your ownbusiness" and be a freelancer, then a Limited Company will probably, inmany cases be a better option than any other.
On the other hand if you dont really want to "run your own business"then PAYE with the staffing company is probably going to be your bestbet.
So finally what about the staffing companies assuming our scenario ? Will the agencies take over PAYE?
This is a considerable possibility. After the initial 'wake' of theabolition of expenses; I wonder if the employment tribunals will startto consider that "forcing" agency workers to pay some £25-£30 for theirpayslips with a separate company ( Umbrella Company ) as an unfair actand done only to avoid employment legislation.
Apart from employment legislation fears, there is no reason why theagencies shouldn't run their own PAYE schemes for their contractors indirect competition with the Umbrella Companies. It would also speed uppayment times to freelance workers by taking one company out of thechain.
I guess the EC Agency Workers Directive will also come into play inthis decision at some point; which, if agreed will provide workersemployment rights after a 12 week period. In my understanding thiswould mean that after 12 weeks the difference between an UmbrellaCompany Worker and a Staffing Company Worker would be negligible inrespect of employment rights, ( and the staffing company or clientsemployment legislation risk ).
If the agencies were to introduce PAYE schemes I calculate that theywould inevitably have to deduct around 19% from your contract rate tocover your holiday pay allowance and their employer's nationalinsurance contributions, and the extra costs in running a payroll.
It is worth remembering that 'Managed Service Companies' existed torun limited companies for those that didn't want to. HMRC brought inlegislation to stop that.
In the same respect, Umbrella Companies have existed as analternative to running a limited company. HMRC seems determined tobring in some legislation in regard to Umbrella Companies.
So is your Umbrella Company payslip worth the money when there are financial gains to be had elsewhere?
Maybe there is one thing you could do if you are currently using anUmbrella Service and waiting for the HMRC to make their announcement ?
Why not take a look at the financial impact of the potentiallegislation. Model your net income without the expenses, and see whatthe impact is. Model a "without expenses" scenario against Agency PAYEand Limited Company options. You may also want to model a "withexpenses" and "without expenses" and see which option best suits you.
You can do all this with our 'comparison tool' available from ourwebsite, details below. Please remember though that the comparison tooljust crunches the numbers, there is some more information you need inorder to make a decision, like " do you want to run a business ?", and"how long will you be contracting?". However the numbers give you somegood ideas, and in many cases that I have seen so far the results arefar from depressing.
To access our comparison spreadsheet. Simply log in or register if you are a new user. Go to Business Library, Blevins Franks Tax Document & Tools, Blevins Franks Comparison 2008/9.
Since HM Treasury issued their consultation paper on 21st July forexpenses under umbrella providers using overarching contracts there hasbeen much talk, and hype in some cases, in the contractor market.
Many providers in the industry fear the end for travel expenses.What effect will this have on businesses in the sector? It is possiblethat recruitment agencies set up their own PAYE schemes for all theircontractors to use? Will contractors leave umbrellas to form limitedcompanies? What if HMT hit limited companies with the same anticipatedrules?
At this current stage, nobody knows what the outcome will be. It istoo early to panic. Clearly some providers will take this opportunityto market other schemes available, namely offshore tax avoidance.
'Professional passport' reportedin their monthly newsletter that "Last month's article highlightednumerous structures that are currently being actively marketed, usuallysupported by a Barristers opinion stating they comply with UKlegislation. It is important to recognise that the MSC legislation wasintroduced under an anti tax avoidance heading. Therefore, whilst an'opinion' today may indicate compliance, HMRC have the right tointroduce legislation retrospectively, which they have already done, inthis area".
Professional Passport is an independent professional body that wasformed for contractors with the introduction of the MSC legislation.They audit service providers and agencies that provide their servicesto contractors and approve those who are compliant. This then gives thecontractor peace of mind that they can choose only fully compliantproviders in the market.
They advise, "Look out for the official Professional PassportAudited and Approved logo on providers' sites to know that we havecompleted a full and thorough compliance review on the provider'sofferings".
So it would appear that the general advice from professionals is notto react prematurely to proposals from the Treasury. Don't jump out ofthe frying pan into the fire; seek professional advice always fromcompliance assured providers.