April 2019 will see the introduction of the 2019 Loan Charge, a measure introduced by HMRC to recoup money deemed to be owed due to the use of disguised remuneration schemes. For countless contractors this means that they are receiving substantial, if not life-changing, bills by HMRC for monies owed from as far back as 1999.
What is a disguised remuneration scheme?
Put simply, a disguised remuneration scheme pays contractors using a loan rather than a traditional PAYE model, therefore avoiding income tax and national insurance contributions.
So far, HMRC has contacted an estimated 40,000 people with demands relating to the loan charge, with an expected £3.2 billion expected to be brought back in from these tax demands.
Many contractors inadvertently joined these schemes with non-compliant umbrella companies, under the impression that this was a compliant way in which to contract, with some arguing that they were given very little choice but to join these schemes in order to get paid.
There have been questions as to why HMRC is dating these charges back nearly two decades, and why more had not been done to shut these tax avoidance schemes down sooner.
How to spot a non-compliant umbrella company?
Whilst schemes such as those detailed above are very rare nowadays, there are still a select few unscrupulous companies operating non-compliant services that will ultimately have a detrimental impact on the livelihood of contractors. So how can you spot these non-compliant umbrella companies?
One of the key identifiers of a non-compliant company are grand service promises that seem too good to be true, because they usually are. These may include:
- Promises of higher take-home pay than any other umbrella company
- Hourly rates below that of national minimum and living wage
- Offering expense claims to all contractors (without checking SDC status)
- Lack of information about services
We strongly recommend that all contractors and agencies carry out thorough due diligence on prospective umbrella companies to ensue they partner with a compliant provider. Keep a look out for accreditations with governing bodies, recommendations and reviews and thorough guidance on each aspect of their service.
Compliance is at the forefront of all we do here at Exchequer Solutions and we endeavour to provide the most relevant service for contractors that allows them to work in a tax efficient manner, compliantly. Find out more about our umbrella and CIS services or contact our team today to learn more about how we can support you.