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AUCAE work with The Low Incomes Tax Reform Group

28/11/2014

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The Low Incomes Tax Reform Group, formed in 1998, has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes. LITRG works extensively with HM Revenue & Customs (HMRC), other Government departments, commenting on proposals and putting forward their own ideas for improving the system.

Their most recent publication is a research report into the use of particular umbrella arrangements, by low-paid agency workers, which have been declared ‘non-compliant’ by HMRC but are still widely in use. http://www.litrg.org.uk/reports/2014/141117-LITRG-PAYE-report.

Lisa Keeble, co-founder of All Umbrella Companies Are Equal (AUCAE) has been in discussion with Meredith McCammond, who compiled the report, and was pleased to be able to offer help and advice on umbrella company processes and procedures. Keeble commented:

“This report into the umbrella industry is one of the most well-balanced that I have ever seen. The authors recognise that many of the problems within the sector have arisen from a ‘seeming reluctance by HMRC to engage with responsible umbrella companies in reaching consensus on a compliant model’. Establishing a blue print for a compliant umbrella model is one of the reasons that AUCAE was set up so I was delighted to work with Meredith on this report and look forward to continuing the relationship to ensure that our joint aims are achieved”

Much of the LITRG report focuses on the ‘Pay Day By Pay Day’ model which has been used extensively by workers earning minimum wage or just slightly above. A proportion of the workers earnings will be ‘sacrificed’ to be processed as expenses, thereby offering tax relief which will then reduce their tax burden. However, as the umbrella company will retain a margin from the contract value and is legally obliged to pay Employer’s NIC to HMRC the workers’ earnings will invariably be pushed below the minimum wage threshold and their tax and NI contributions will be negligible or even zero. This model has been challenged by HMRC and workers have subsequently received demands for underpaid taxes. LITRG feel that HMRC should cease this practice and should, instead, issue Regulation 80 demands against the scheme providers.

Keeble feels that a policy of targeting providers of non-compliant schemes and those that recommend them rather than those that use them, who may often be completely uneducated about tax matters or may not even have English as their first language, is likely to be far more effective in reducing abuse.

Lisa Keeble is the Managing Director for ContractorUmbrella Ltd, one of the UK’s Most Respected Umbrella Companies and founder member of AllUmbrellaCompaniesAreEqual.
Learn more about Lisa on Google.

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AUCAE to meet with the OTS to review the issues surrounding employment status.

26/11/2014

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Leading trade body All Umbrella Companies Are Equal (AUCAE) have been invited to assist the Treasury with their review of the issues surrounding employment status and will shortly be meeting with the Office of Tax Simplification (OTS) for initial discussions.

The OTS wish to consider whether the UK’s current employment status tests produce meaningful results and determine if there are any discrepancies between industry sectors/job types. They will also be examining how well the existing rules and guidelines work in situations where individuals have multiple roles.

As a representative of over 30% of UK umbrella company providers supplying services to the freelance market, AUCAE are well positioned to contribute valuable input to the debate.

Wesley Scott of Liberty Bishop and member of AUCAE stated; “an area of particular interest to the group is the issue of the UK’s changing working patterns in recent years and how the growth of contracting impacts upon employment status processes.”

AUCAE are looking forward to providing feedback on the practicalities and routes through which individuals and businesses can engage with HMRC in order to obtain advice and guidance.

Scott continues; “Our participation in this review follows previous involvement in government consultation processes (most recently the Offshore and Onshore Employment intermediaries “round-table” discussions) and forms part of our ongoing commitment to compliance and transparency within the tax system.”
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More Information Please Mr Taxman

21/11/2014

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A recent survey by industry body All Umbrella Companies Are Equal has revealed that HMRC are just not reaching their target audience. Is it that tax is just too taxing or are heads being buried in the sand?

The Offshore and Onshore Intermediaries Legislation had massive implications for the contracting world but over 70% of people who responded to the survey had never heard of them. The Onshore Intermediaries Legislation meant that 1000’s of workers who, for years, had been in the CIS scheme were, all of a sudden, liable for PAYE taxes which, if their contract rate was not increased, reduced their take home pay significantly. Although there were many articles published by umbrella companies, industry bodies and recruitment agency representatives the message just didn’t get across which resulted in strikes and protests by the affected workers when the changes came into force. 

Maybe it’s that information that comes from HMRC is just not as targeted as it should be or maybe it’s that people just don’t want to hear it? Alternatively it could be that there is too much ‘misinformation’ for the message to be clear. Tax avoidance is extremely high profile at the moment and HMRC’s clampdown has been well publicised, yet 67% of people responding to the AUCAE survey said that they had been approached by tax avoidance promoters ,calling themselves umbrella companies, offering ‘high reward, low risk’ schemes. These scheme operators can appear very credible and with 87% of those surveyed not knowing the penalties for tax avoidance the ‘high reward’ must be very tempting. Yet contractor forums are full of tales of suffering from those who have used such schemes and been caught out by HMRC!

Lucy Smith of AUCAE said “industry bodies, umbrella companies and recruitment agencies are all useful resources for contractors to keep up to date with changes in legislation but HMRC must do more”. She suggested that a section of HMRC’s website be dedicated to those issues which affect temporary workers.

If the survey results are indicative of public awareness then surely this suggestion would benefit not only the contractor industry but also HMRC in their pursuit of tax collection.

Lucy Smith is the Sales & Marketing Manager for ContractorUmbrella Ltd, one of the UK’s Most Respected Umbrella Companies and founder member of AllUmbrellaCompaniesAreEqual.
Learn more about Lucy on Google.

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All Umbrella Companies Are Equal work with HMRC to produce Umbrella Company Compliance Manual

4/11/2014

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The industry group, All Umbrella Companies Are Equal, has spent the last year working closely with HMRC to produce a manual for its umbrella company members, detailing what constitutes a "compliant' umbrella company.

The comments and guidance provided by HMRC on the manual give a definitive standard that will be adopted by all its members and those wishing to gain membership to the self-regulatory group.

The group, which now has 36 approved members and 11 pending applications, represents well over 30% of all UK umbrella companies and is fast becoming the go-to place for both contractors and recruiters looking to gain valuable advice about the industry.

Lisa Keeble; one of the founder members commented; "Over the past few years there have been many debates between industry professionals as to what would constitute a "compliant" umbrella; this manual will now confirm just that! It will undoubtedly allow us to provide clearer guidance to all those involved in the contracting market and give confirmation for those intending to work to HMRC guidelines."

Amongst the guidance, HMRC have confirmed what requirements are necessary in order for a contract of employment to be "truly" over-arching, covering topics such as; Mutuality of Obligation with the provision for a minimum of 336 hours, pay between assignments and Statutory Employment rights. There is also confirmation that any UK PAYE umbrella company should no longer be operating, what is commonly referred to as, "Rolled Up Holiday Pay" and that all umbrella's should be allowing for the provision of pay when holiday is taken.

The All Umbrella Companies Are Equal group would like to thank HMRC for their ongoing support and assistance in helping to create a level playing field.

This article has been written by Lucy Smith, one of the founder members of the All Umbrella Companies Are Equal regulatory group.
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