[UK] HMRC updates guidance on working through umbrella company

It seems the UK Government has no intention to put a stop to the use of umbrella companies. On April 30 it published updated guidance on working through an umbrella company, Express reports.

The updated guidance can be found on the Government's website, it is wide-ranging but Crawford Temple - the CEO of Professional Passport - broke down the key changes that have been announced. They are:

* "Removal of the paragraph on different hiring models for umbrella companies, as we recognised that this would cause potential confusion with contractors.

* "Removal of the paragraph on the off-payroll working rules to avoid any confusion.

* "Clarification that the term ‘assignment rate’ is used to describe the payment from the agency to the umbrella company and have added ‘Limited Company rate’ as another example of terminology sometimes used in the market.

* "Made explicit that where an umbrella company pays the contractor the NMW plus another element, this should all be taxable and highlighted that if any of this is stated as non-taxable it may be an indicator of an avoidance scheme.

* "Reiterated that the employer NICs liability should be deducted from the umbrella’s rate, not the contractor’s gross pay.

* "Added section on Holiday pay, recognising that this is another area of interest for contractors."

Commenting on the changes, Crawford reportedly concluded by saying "This is a good start. "We have been working closely with HMRC on this document and pressing for HMRC to provide information on umbrella companies, and not just about the disguised remuneration risks.

"We have asked for HMRC to also develop an umbrella pay calculator for its website that will allow interested parties to check the pay illustrations they may have been provided.

"This will not only expose the disguised remuneration schemes, although many of these do not provide any illustrations or information in writing but also expose those providers who may be attempting to obfuscate and hide exactly what they are doing.

“We are also still working with HMRC to try and find a way to more proactively use the combination of data provided through intermediary reporting and RTI.

"This, I believe holds the key to severely limiting market access for the ‘have I got a good idea for you’ schemes and stamping out malpractice.”

It seems the UK Government has no intention to put a stop to the use of umbrella companies. On April 30 it published updated guidance on working through an umbrella company, Express reports.

The updated guidance can be found on the Government's website, it is wide-ranging but Crawford Temple - the CEO of Professional Passport - broke down the key changes that have been announced. They are:

* "Removal of the paragraph on different hiring models for umbrella companies, as we recognised that this would cause potential confusion with contractors.

* "Removal of the paragraph on the off-payroll working rules to avoid any confusion.

* "Clarification that the term ‘assignment rate’ is used to describe the payment from the agency to the umbrella company and have added ‘Limited Company rate’ as another example of terminology sometimes used in the market.

* "Made explicit that where an umbrella company pays the contractor the NMW plus another element, this should all be taxable and highlighted that if any of this is stated as non-taxable it may be an indicator of an avoidance scheme.

* "Reiterated that the employer NICs liability should be deducted from the umbrella’s rate, not the contractor’s gross pay.

* "Added section on Holiday pay, recognising that this is another area of interest for contractors."

Commenting on the changes, Crawford reportedly concluded by saying "This is a good start. "We have been working closely with HMRC on this document and pressing for HMRC to provide information on umbrella companies, and not just about the disguised remuneration risks.

"We have asked for HMRC to also develop an umbrella pay calculator for its website that will allow interested parties to check the pay illustrations they may have been provided.

"This will not only expose the disguised remuneration schemes, although many of these do not provide any illustrations or information in writing but also expose those providers who may be attempting to obfuscate and hide exactly what they are doing.

“We are also still working with HMRC to try and find a way to more proactively use the combination of data provided through intermediary reporting and RTI.

"This, I believe holds the key to severely limiting market access for the ‘have I got a good idea for you’ schemes and stamping out malpractice.”