HMRC have released a useful article about tax avoidance for workers to make sure that they are not involved in tax avoidance schemes. We strongly recommend that workers read the article here: https://taxavoidanceexplained.campaign.gov.uk.
HMRC on tax avoidance
Agency workers have seen a lot of changes in the last few years.
With changes in areas such as several rights, tax treatment and employment statuses. A lot of the changes revolve around “Umbrella Companies”, especially in the construction sector.
If you’re an agency worker in the construction sector we have looked at the guidance published by the HM Government on tax avoidance and have drawn some conclusions to help you.
The problem with so much change in legislation is that it’s hard to make sure you are dealing with companies that won’t put you at financial risk. We have found that the vast amount of recruitment agencies in the marketplace along with new umbrella companies popping up all the time are not paying the correct taxes or providing you with correct tax status.
The HM Government article on tax avoidance clearly points out what to look for when using or looking for a compliant umbrella company and how to protect yourself from huge fines from the HMRC.
Ensuring you are getting paid correctly when working as an agency worker or being paid via an umbrella is important and should be every contractor’s main concern.
You should be:
- Ensuring you are treated correctly for tax and employment rights.
- Looking out for the suggested red flags the HM Government point out in this article.
- You can also look out for some of the obligations your recruitment agency should be providing to ensure fairness and transparency when using and umbrella.
To help workers understand what to expect from a recruitment agency we have listed some of those obligations. Hopefully, this helps you to get an idea of what to look out for.
Has your agency provided you on registration a list of the umbrellas on their preferred Suppliers List (PSL) and what their fees are for Payroll?
All recruitment agencies must provide a choice of umbrellas they use to process contractors pay and be transparent in the fees that these umbrellas charge for processing payroll.
No recruitment agency can force a contractor to use one umbrella and it must be a choice.
To make this process more transparent P.I.E.R have Partnered with Safe Rec, to control our transparency of our PSL detailing their accreditations and fees to contractors.
Has your recruitment agency provided you with a written details of assignment for your work?
The assignment must clearly state the options of umbrellas that you can choose from and the details of each one’s fees.
Recruitment agencies have a legal obligation to provide a contractor with a written details of assignment. This must clearly detail the assignment as well as that of the umbrella from which you will be paid.
At P.I.E.R every worker receives an email of their next assignment detailing the Umbrella companies on our PSL, with a link to view all our payroll providers so workers can make their own choice of payroll provider
Has your recruitment agency provided you with a (KID) Key information Document?
For every assignment you undertake for a recruitment agency you must receive a (KID) key information document. This is so that you as an agency worker have more information about your pay, tax treatment, employment status and the type of contract you are working under, particularly so that you can see how deductions and fees affect your pay.
These are just a few things to also be aware of don’t get caught out and end up footing a hefty tax bill. Look and look again at the information you are receiving from your recruitment agency.
- Is it transparent and clear?
- Are you given choice?
- Have you made sure the umbrella you are using is doing everything correctly?