Tax avoidance was once again at the forefront of the government’s agenda in the Autumn Budget. A topic that has been meticulously discussed, Philip Hammond announced during his speech on Wednesday 22nd November 2017 that “the Government is committed to tackling tax evasion, avoidance and aggressive tax planning.”
We’ve already seen an increased focus from HMRC in 2017, spotlighting various disguised remuneration schemes that are currently blighting the contracting industry. With the introduction of The Criminal Finances Act on 30th September, the government are determined to enforce and stop tax avoidance. By introducing further measures, Hammond wants to make sure that everyone pays their taxes. The Budget announced that time limits on self-assessment will be increased to at least 12 years and further investment will be placed into strengthening resources to counter “threats to our tax base.”
HMRC has recruited an additional 200 staff to their enforcement services over the past 6 months, whose sole purpose is to focus on disguised remuneration schemes and Criminal Finances Act. Therefore, it is vital for both contractors and recruiters to be vigilant regarding the providers that they choose to work with and ensuring there is compliance with all HMRC legislation. Otherwise, you will be personally liable to repay any unpaid taxes, national insurance contributions and fines or penalties incurred. Note that these can backdate to the time the taxes should have been paid.
The Criminal Finances Act 2017 has led many recruitment agencies to reconsider the umbrella companies that they engage with as from 30th September 2017, agencies, as well as individual consultants, could be criminally liable if they fail to prevent tax evasion. This includes taking undisclosed payments from tax avoidance schemes or even simply advocating such schemes by acknowledging that their candidates are working through them.
There has been a spike in additional due diligence being carried out by agencies and it is encouraged to regularly carry audits on umbrella providers. By putting in place a strong compliance checklist and having chosen preferred suppliers, who are externally audited by Professional Passport, APSCo, or FCSA, agencies can be confident that they are not facilitating tax avoidance.
For temporary workers within the public sector, there has been a significant rise in the use of umbrella companies after the new government legislation applied in April 2017. With many contractors being deemed to be inside IR35, agencies and public-sector bodies now require payroll to be processed through umbrella companies so that employment incomes are subject to full PAYE deductions.
However, for contractors who saw this legislation change affect their take-home pay, there was a sudden outburst of uncompliant umbrella companies springing into action claiming that workers can retain 80% of their income through them. HMRC are aware of these schemes and it is advised that any contractor currently avoiding paying taxes through these providers should re-consider their options and seek a compliant PAYE provider.
Why using compliant umbrella companies is the way forward?
Despite arguments seen in the media, there will always be a requirement for compliant umbrella providers to support contractors and recruiters with payroll. To avoid the threat of prosecution and penalties as well as the anxiety of whether the taxman will come knocking at your door. Or if you simply don’t want to deal with the hassle of administrative tasks then work with an umbrella company based in the UK, who will process all income PAYE.
Our sister company, Cloud9 Umbrella has now been acquired by JSA Group, leading providers of umbrella for contractors, Established in 1989, JSA has over 150 head office staff and look after more than 11,000 Umbrella and Limited company contractors each week. JSA hold compliance and customers at the heart of everything they do. Since 2011, JSA’s commitment to its clients and employees has been recognised by its FCSA accreditation. This benchmark is acknowledged as the industry’s compliance Gold Standard.
This acquisition will continue to deliver a comprehensive service, further strengthening the level of customer support received from Cloud9. This means that you can focus on what you do best, safe in the knowledge that JSA is taking care of your payroll and employment rights.