HMRC Compliance activity targeting Umbrella Companies & Agencies
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 !