[UK] Mike Lowndes steps down from FDSA after £11m unpaid tax ruling

In the UK, Mike Lowndes - the MD of Exchequer Solutions Ltd - has stepped down as a board member of compliance body the Freelancer & Contractor Services Association (FCSA), ContractorUK reports.

Mr Lowndes's resignation follows a judge’s ruling that the Chester-run umbrella company owes what has reportedly been described as a “mega” £11 million in taxes related to contractor expenses.

Mr Lowndes voluntarily stepped down on June 22, relinquishing the FCSA role he was elected to in November 2021, for no other apparent reason than the ruling against his umbrella.

His resignation comes after just six months in-post. After the ruling, ContractorUK put questions to the FCSA about his suitability to be a board member of a compliance body when his own umbrella company has been ruled by a court to be non-compliant.  

Speaking through the association on June 22, Exchequer Solutions Ltd (ESL) said it “strongly” believes the ruling in favour of HMRC to be “mistaken in several areas.”

ESL will therefore appeal the First Tier Tribunal’s judgment, handed down by FTT judge Robin Vos, which, broadly, went against the umbrella in two areas:

• Exchequer’s “many thousands” of contractors between 2013/14 and 2016/17 were “not” on an overarching employment contract, and so should “not” have had their expenses reimbursed tax-free.
• and also contrary to what the umbrella argued, ESL was “not entitled to reimburse subsistence expenses on the basis of benchmark scale rates,” because the firm had “not” applied for or received a dispensation from HMRC.

Agency legislation expert Carolyn Walsh told ContractorUK, “HMRC found that the part of ESL workers’ income was processed as travel costs paid free of tax and NI, and that relies on PAYE legislation; so the involvement of an overarching contract of employment was only part of the challenge.

“HMRC warned the sector in 2015 that the way umbrella companies processed expenses would change; which it did with the removal of dispensations in 2016 and the allowance of tax relief on reimbursed travel expenses only where the agency/umbrella worker is not working under supervision, direction or control.”

Ms Walsh - a former tax inspector and boss at umbrella company CWC Solutions - said, “The defence by ESL was that an overarching contract of employment was in place and so the rules that apply to intermediary workers did not apply to their ‘employees.’ Yet the tribunal rejected this on a number of grounds.

“For the vowed appeal, the only defence I can see would be [to argue] that the intermediary/umbrella worker was not working under supervision, direction or control of the agency or hirer. But the tribunal didn’t see necessary to consider [this] at this stage.”

On June 22, FCSA chief executive Chris Bryce said the issues before the FTT were “highly technical” but also seemingly singular.

“HMRC’s case rests almost entirely on the question of the employment contracts issued by ESL to workers at the time, and whether those contracts were overarching contracts of employment, or if each assignment should be considered as a separate employment.

“[But] there is no statutory definition of an overarching contract”, continued Mr Bryce. “[And] it is important to note that there are no allegations [against ESL], by HMRC or any other party, of any type of fraud or negligence”.

Source: ContractorUK

(Links and quotes via original reporting)

In the UK, Mike Lowndes - the MD of Exchequer Solutions Ltd - has stepped down as a board member of compliance body the Freelancer & Contractor Services Association (FCSA), ContractorUK reports.

Mr Lowndes's resignation follows a judge’s ruling that the Chester-run umbrella company owes what has reportedly been described as a “mega” £11 million in taxes related to contractor expenses.

Mr Lowndes voluntarily stepped down on June 22, relinquishing the FCSA role he was elected to in November 2021, for no other apparent reason than the ruling against his umbrella.

His resignation comes after just six months in-post. After the ruling, ContractorUK put questions to the FCSA about his suitability to be a board member of a compliance body when his own umbrella company has been ruled by a court to be non-compliant.  

Speaking through the association on June 22, Exchequer Solutions Ltd (ESL) said it “strongly” believes the ruling in favour of HMRC to be “mistaken in several areas.”

ESL will therefore appeal the First Tier Tribunal’s judgment, handed down by FTT judge Robin Vos, which, broadly, went against the umbrella in two areas:

• Exchequer’s “many thousands” of contractors between 2013/14 and 2016/17 were “not” on an overarching employment contract, and so should “not” have had their expenses reimbursed tax-free.
• and also contrary to what the umbrella argued, ESL was “not entitled to reimburse subsistence expenses on the basis of benchmark scale rates,” because the firm had “not” applied for or received a dispensation from HMRC.

Agency legislation expert Carolyn Walsh told ContractorUK, “HMRC found that the part of ESL workers’ income was processed as travel costs paid free of tax and NI, and that relies on PAYE legislation; so the involvement of an overarching contract of employment was only part of the challenge.

“HMRC warned the sector in 2015 that the way umbrella companies processed expenses would change; which it did with the removal of dispensations in 2016 and the allowance of tax relief on reimbursed travel expenses only where the agency/umbrella worker is not working under supervision, direction or control.”

Ms Walsh - a former tax inspector and boss at umbrella company CWC Solutions - said, “The defence by ESL was that an overarching contract of employment was in place and so the rules that apply to intermediary workers did not apply to their ‘employees.’ Yet the tribunal rejected this on a number of grounds.

“For the vowed appeal, the only defence I can see would be [to argue] that the intermediary/umbrella worker was not working under supervision, direction or control of the agency or hirer. But the tribunal didn’t see necessary to consider [this] at this stage.”

On June 22, FCSA chief executive Chris Bryce said the issues before the FTT were “highly technical” but also seemingly singular.

“HMRC’s case rests almost entirely on the question of the employment contracts issued by ESL to workers at the time, and whether those contracts were overarching contracts of employment, or if each assignment should be considered as a separate employment.

“[But] there is no statutory definition of an overarching contract”, continued Mr Bryce. “[And] it is important to note that there are no allegations [against ESL], by HMRC or any other party, of any type of fraud or negligence”.

Source: ContractorUK

(Links and quotes via original reporting)