Around 20,000 former NHS and retired healthcare workers have returned to work to support people affected by coronavirus and combat its rapid spread. If you are returning to work and are required to use an umbrella company, HMRC is urging you to be wary of dodgy tax-avoidance schemes. Please, only use compliant and reliable providers – they’re easy to identify! Just check that the provider you’re interested in using is FCSA accredited.
Be wary of misleading newspaper articles claiming all umbrella companies are disguised remuneration scheme
We are saddened to have recently seen misleading newspaper articles targeting umbrella companies for promoting tax avoidance schemes to returning NHS workers. These articles have been written by misinformed journalists who paint a very damaging and inaccurate picture of what umbrella companies are. The majority of umbrella companies (like Churchill Knight Umbrella) operate in full compliance with HMRC legislation and offer a legitimate and efficient way for contract workers to get paid (PAYE), including those working for the NHS.
Look out for umbrella companies promoting tax avoidance schemes
Unfortunately, like every industry, employment intermediaries have untrustworthy providers which tarnish the reputation of compliant umbrella companies. These schemes claim you can retain 85-90% of your pay – which seems attractive as you’ve worked extremely hard for your money.
However, these schemes are in fact, tax avoidance schemes. They are attempting to disguise the true level of your earnings, which would ordinarily be subject to National Insurance Contributions and Income Tax.
Some umbrella companies may offer vague explanations of how the schemes work, such as using your Personal Allowance more efficiently or taking advantage of different payment structures. Often the worker will be paid a minimum wage; then a second payment will be made, which the company will claim is not taxable – such as a capital advance, credit facility, loan or share.
Before registering with an umbrella company, always ask for an illustration and check how much National Insurance and tax you would typically have to pay on your income using HMRC’s tax calculator. This will give you a good indication of whether the correct deductions will be made to your pay.
If you decide to compare illustrations to see which offers the best net take home, please be aware that what is included in a calculation differs between companies. Our blog explains why your illustrations may vary between umbrella companies.
You can also look for the company’s information on Companies House and find out information about the director where possible. If you cannot find the company, it is most likely offshore.
More information about tax avoidance schemes targeting returning NHS workers can be found on the government’s website – available here.
Always use an accredited umbrella company for your peace of mind
The FCSA is a respected regulatory body within the industry and is well known for its transparency and sharing of information with HMRC. Umbrella companies that are FCSA accredited are setting an example for the industry – as they have to follow strict Codes of Compliance.
Using an FCSA accredited umbrella company gives you complete peace of mind that they are operating ethically within the market, and your pay will be processed as per UK tax law. It is a fool-proof way to ensure you will not be using a tax avoidance scheme and will not be faced with a large tax bill at a later date.
Our objective is to provide contractors with compliant and efficient payroll
For all the NHS and healthcare workers who are working hard during this difficult time – we would like to thank you for your ongoing efforts, we appreciate it!
Churchill Knight Umbrella has helped thousands of contractors with their payroll, and we look forward to supporting more during this time. Founded by experts and backed by over 20 years’ experience in the industry, our commitment to compliance means you will be in the safest hands.
If you are interested in joining a compliant umbrella company or would like to find out more about the benefits of joining us, please schedule a call for a time that suits you, and one of our friendly consultants will be in touch.