Are you a contractor? If you work for someone else, it is important to know whether you are working for that person in an employed capacity or in a self-employed capacity as an independent contractor.
Your employment status will determine the charge to tax on income from your employment or self-employment. It will also determine the class of NICs, which are to be paid.
Umbrella Companies employ you for tax purposes and complete central returns for all their contractors. It's less hassle and more flexible for you but take home pay is typically less than that the limited company option.
The best option for you depends on your plans, 'one off' contract or 'contractor for life'? [Read More...]
Offshore umbrella companies – the scheme that robs HMRC of circa £100 Million per annum.
As our regular contractors and users know, Umbrella Compare is constantly reviewing the umbrella company market to uphold our aim of delivering the right information for our users to make an informed choice and access a compliant, vetted umbrella company or accounting solution. In this article we highlight AGAIN the danger of using offshore umbrella companies and underline why you should elect to use a vetted and approved umbrella company listed and endorsed by Umbrella Compare.
Offshore umbrella companies have always been high risk, any umbrella company that operates an offshore scheme automatically fails our vetting procedure. A list of umbrella companies which have successfully completed our vetting procedure can be found here.
Umbrella companies that use this scheme tie into the tax law that allows monies leaving the country (going offshore) to do so untaxed. The same money will not be taxed until the point in comes back into the UK (onshore). So, you would expect to pay tax, right? Unscrupulous umbrella companies invest your ‘offshore money’ and actual advance you a loan on the investment. They may not tell you, but this isn’t technically paying you, they are effectively managing an investment portfolio.
This places contractors in a very dangerous position and has led to some contractors losing their homes, savings and sadly to some taking their own lives. One website was highlighted to us by one of our readers which quote offshore umbrella companies as a 'neat scheme', try preaching that to someone who has lost their home and marriage. There are of course numerous stories of high earners taking their money offshore and not paying taxes but this is normally facilitated by the individual spending most of their time living outside the UK, this is not a like for like comparison. The offshore umbrella company scheme is basically money laundering. The umbrella company takes your money and gives you a loan which you never repay or 'pay with your earnings without interest'. It doesn't take a HMRC inspector to realise that its corrupt accounting.
Sorry, but it’s not good news, your one of the unlucky 100,000 or so contractors potentially facing a 7 year backdated tax bill. First of all you need to check with your recruitment agency (they are also being brought into account as part of the new legislation, this may help you in some respects and circumstances). If it transpires that your umbrella company is operating an offshore scheme then leave your umbrella company as soon as possible, sign up with one of our vetted umbrella companies.
Secondly you need to take some legal advice. There is huge debate as to the actual 'retrospective' payments, if forced through this will affect common everyday workers, the reality is that it is the umbrella companies themselves who operated these schemes who should face the cost. By acting now and switching to an approved, vetted umbrella company your will show goodwill and be prepared for the new legislation which is due in April 2014 as part of the 2014 Finance Bill.
The new legislation will see the responsibility for Tax and National Insurance payments transfer away from the contractor directly to you. It’s time to review how you have been conducting your relationship with your 'preferred umbrella companies'. Are they preferred because they paid a big commission or have you been honest and upfront and referred based on quality and experience? If you have forced contractors into using a specific umbrella company purely for your own financial gains they you may pay a high cost. You have 2 options, you can start to independently review existing umbrella companies and choose a selection of those that pass your own compliancy tests (which must adhere to HMRC standard as minimum) or you can direct your contractors to umbrella Compare where they can independently select an umbrella company that has passed our rigorous vetting procedure.
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It's the basics... Compliance with Tax, VAT, PAYE and fiscal arrangements is mandatory for contractors regardless of whether you use an umbrella company or your own limited company.
Incredible then that there are still rogue umbrella companies and limited company accountants who expose their contractors to fraud. Umbrella Compare provides THE solution, we thoroughly vet all umbrella companies and limited company accountants that we list [Read more...].
Umbrella Compare provides a holistic overview of contracting with the aim of helping new and old contractors find the right payroll solutions. Contracting should be about focusing on the contract, not payroll, accounting, HMRC and bureaucracy.