The Umbrella Companies Blog Archive: December 2008
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The end of the year is nigh and it's traditional to take a somewhat clichéd look back over the year's events, so that's exactly what I am going to do.

The new year brought with it the final installment of the April 2007 MSC legislation; Agencies were finally included in the transfer of debt legislation, which was only a problem if they were found to be in business with an MSC provider that wasn't deducting full Tax and NI. The end result was that we were asked by agencies to send out samples of our payslips to show that we were indeed making the required deductions. This wasn't really a chore, since our umbrella company had deducted and paid full PAYE and NI since April 2007.

Apart from constantly rising fuel prices the year stayed quiet until March, when our preparations for year end really started to kick off. That was immediately followed by April's budget, which brought with it the usual expectant waiting and pouring over documents. The biggest news to come out of that was the abolition of the 10% tax bracket and the resulting refund which we were happy to put through for you in September.

Fuel prices started to level out in May, but were already over 110p per litre. In June I started this blog, with the first actual topic being UCATT calling for an end to CIS. June also saw the first of Susan's Legal Bits, this one about The Agency Workers Directive. Even after 6 months nobody's really any clearer on what the legal standpoint is on a lot of items within it (Susan has just made it clear to me that she is keeping on top of the AWD for us, and as soon as she has firmer information she will let us know).

The month of July brought a peak to the fuel prices just falling short of an average 120p per litre for unleaded. After that they started to come down and we all breathed a sigh of relief. We introduced the Construction Industry Holiday Scheme which boosted and continues to boost the holiday pay that construction workers receive.

Things were quiet until September when we announced the start of our self employed options, and all of a sudden things got busy again, Susan wrote about TUPE and how it would affect things (essentially not at all), and I spoke about the Governments Consultation on "Tax relief for travel expenses: temporary workers and overarching contracts" that was ultimately put to one side as the economy collapsed around us.

In October we started our new services, Solo and CIS. The site got a much needed revamp and it was a busy month all round.

November was a welcome quiet patch for news after October's business, I posted some useful bits and pieces on Employment status, and Susan opted to answered your questions rather than cover a specific topic.

All of which brings us to December, and the Pre-budget report which only really held good news. The main one as far we were concerned was that the threat posed by the consultation on "Tax relief for travel expenses: temporary workers and overarching contracts" has not materialised, although HMRC have said that they may revisit it in the future. In addition HMRC declared it's intention to investigate and litigate with those providers not operating in a compliant manner in the near future.

All of which brings us up to date.

To all of you that visit the site and read blog, whether you are a contractor, consultant or competitor, I would like to say thank you for helping to make the site a success. On behalf of Gabem I'd like to wish you all a Happy New Year and a great night tonight.

Hugo
31/12/2008

Christmas has finally arrived, and I hope you have managed to get here with the minimum of stress and are looking forward to the day itself.

As a snapshot of things here, cards and decorations cover every desk, the IT department have managed to turn what could have been a tasteful well arranged display into an exploration of tackiness as only they know how (the 4 foot slightly wilted inflatable Christmas tree is perhaps their crowning achievement), Emma (who some of you may have spoken to in the past) is wearing her Christmas hat, and payroll have acquired the look of grizzled battle hardened veterans (apologies ladies).

There is a determined look in their eyes, and it's all down to trying to squeeze the normally 5 day payment process into a hectic 2 day time frame. If you add to that the fact that your agencies and the banks are trying to do the same thing, and you'll understand it's quite a juggling act. That said they have managed it admirably with the kind of nonchalance only true professionals can muster, despite that I'm sure they are pleased they only have to do this a few times a year.

We would like to thank everyone who has phoned, emailed or texted us Christmas greetings, we really appreciate them all. As we all head off for a few days of the usual festive excess I would like to wish you all a very happy Christmas, don't overdo it (too much), and stay out of trouble.

Merry Christmas

Hugo
24/12/2008

I think we can all agree Christmas, regardless of how much we may love it, brings with it a certain amount of stress. Whether it's agonising over what present to get someone that is particularly awkward, the fact that you're finding it tougher to get up in the mornings and have overslept again, or if you are worrying about what happened at the office Christmas party or even who gets the kids Christmas day.

All of this can leave you distracted, which for those of you working on a construction site, or with dangerous equipment or electricity could have some pretty serious consequences. Just today I've heard about 3 minor car accidents involving people I know, nothing serious just lapses of concentration and broken bumpers. It wasn't even icy.

You can't really avoid the stress I know, it goes hand in hand with the season, but you can try to be more careful as you go about your daily business, take a moment to double or triple check what you've done or are about to do, take note of when you're not thinking clearly and just take a moment to pull yourself together.

In terms of stress prevention, as I said there isn't much you can do, but if you find you are getting stressed just take some slow deep breaths, and get out of the situation that's causing you problems. If it's a crowd, just dash into somewhere where you can buy a cup of tea (coffee probably wouldn't be the best idea) and compose yourself. If it's your family, maybe it's time to go take that walk or visit a friend. Whatever seems important just before Christmas will be practically forgotten two weeks later, it's not worth breaking yourself over.

Your best bet is to find some non-alcoholic way to manage your stress rather than prevent it. Exercise is an excellent start, especially something like boxercise or a martial art, failing that, just go for a run, it's the ideal time to start, take it from me (speaking from the point of view of an overweight geek, running when it's dark saves you a reasonable amount of embarrassment and the colder air prevents early overheating) just make sure that you are visible if you are running near roads.

If exercise isn't your thing just take some more time for yourself, turn off your phone, order in something nice rather than cook (everyone puts on weight around Christmas, especially the dieters who just end up eating more to make themselves feel better, save it for the new year), take longer baths or showers, and just relax. Equally, if your partner is stressed treat them to the same, save them the cooking or run them the bath, it will pay dividends for you both in the long run.

Anyway, drive safe and look after yourselves.

Hugo
17/12/2008

Another Friday has come around again, only 12 days until Christmas, it's all moving pretty quickly now. On that theme, Eileen the operations manager has asked me to mention that with Christmas coming up it would probably be a good idea to check the dates your agency or company will be paying on, our payment days can be found here, or in with your payslip arriving tomorrow.

Regardless of which day your agency is paying, a lot of you will have built up holiday pay that you can choose to take (and the sooner you inform us you're taking it the better). As I've said before with Easter falling after the new financial year in April, Christmas is probably the most convenient and "tax efficient" (I hate that term) time to take it (unless you're planning on taking a holiday in the early part of next year).

All holiday pay has to be taken before the end of the tax year, otherwise it will be lost. I am going to keep reminding you.

In another bout of mailing decadence we received yet more post from a government department that will remain unnamed, they decided that it would now be a great time to send us 11 boxes of more useless post, sent recorded delivery this time, to really splash out. That came to around three to four thousand items, at least it wasn't HMRC, they are getting better.

That's it for another week, have a great weekend, and look after yourselves.

Hugo
12/12/2008

A rash of updates yesterday several of which were quite long. Today I have one more, this is our official response to the HMRC news. I think with the agency document the press release and yesterdays blog post we've covered most of the bases. If there is anything you think we haven't covered or anything else at all feel free to email us here, after all the internet is meant to be interactive.

Our advisors have been in this week for another of our regular audits, it's actually been taking place over the whole of the last month. You'll see they crop up fairly frequently in the blog, and that's largely because every time a rule gets changed, or there is a government report they come in and make sure we're playing ball. It's just good practice, and ensures that we stay on the right side of HMRC (it also means we do get to know them pretty well).

That's it until Friday, in the meantime I'll point you in the direction of yesterday's updates as some are harder to find than others:

Susan's Legal Bits: Why we reserve your holiday pay

Pre-Budget Letter: Implications of Pre Budget Report and HMRC announcement on MSC Legislation

Pre-Budget Press Release: GABEM BACKS HMRC CRACKDOWN

And of course yesterday's blog post below.

Hugo
10/12/2008

Hi everyone, a bit of an early post for you today, there will be another tomorrow, but as quite a lot has gone on the site I thought I should keep you all updated.

Susan has updated her legal bits, this month she talks about why we reserve your holiday pay. It's quite a long one but I think it's her most informative to date, so go take a look here.

I've also added the letter we've sent out to the agencies in response to the Pre-budget report, I'll follow that up with the main response tomorrow for you all to see.

In the meantime here is the big post about the Pre-budget report I mentioned in the title. It's actually last Wednesday's post, which was delayed while I got my facts straight. Here goes:

It's been a good week so far; not only are offshore tax havens finally getting some much deserved attention in the form of Michael Foot (former managing director of the financial services authority), but yesterday HMRC published a document online asking "How sure are you that your company is not a Managed Service Company (MSC)?".

The document details HMRC's changing stance on what they regard as a Managed Service Company and what they plan to do about it. I'm sure there is going to be a flurry of companies re-assuring their operatives that they are most definitely not an MSC and expecting people to take their word for it. I on the other hand encourage you to take a look at the document itself, and draw your own conclusions.

In our opinion these are the key points:

"HMRC's position is that being an officer/partner in a service company does not preclude that person from being an MSC provider.

HMRC considers that companies and partnerships which otherwise fall within the Managed Service Company legislation (that is, fulfil the criteria of Chapter 9 ITEPA), but claim not to be MSCs because the provider is an officer/partner of the intermediary, are MSCs.

HMRC will now look for suitable cases to investigate and, where appropriate, challenge and litigate."

This means that people using intermediary companys (including umbrella companies) will have to be particularly careful about how the company they are working through is structured. Since the 10th of October anyone paid through the Gabem Umbrella Company system has been employed directly by Gabem Management Limited, there are no smaller companies any more (although I will continue to talk in those terms simply because it keeps Google interested), this is what the TUPE letters and Susan's Legal bits were about at that time.

To continue:

"Providers of such companies, their associates and individuals providing their services through such companies will be those most at risk from the transfer of debt provisions.

Those providing their services through companies based outside the UK should not assume that this fact alone exempts their company from the legislation and them from the consequences of non-compliance. If the provider and their associates are based outside of the UK tax jurisdiction, then the persons most at risk are individual workers based in the UK."

Another blow to offshore companies, and more importantly those that use them. HMRC may not be able to go after the company in question but in the cases where they can't the full weight of the transfer of debt will be carried by the people using the offshore company. Transfer of debt being the tricky beast that it is could mean that people will likely end up paying for more than the tax and NI than they would have saved.

Last but not least there is:

"Depending on the contractual relationship between the parties and the true nature of the services provided by the intermediary, the intermediary may not be a contractor within the meaning of the CIS legislation, rather they may simply be a nominee of the worker. Where the intermediary is a nominee, both the intermediary and the worker must have gross payment status in order for payments to be made gross."

This applies only to people working within the CIS system, and operating through a self employed payment company, it's pretty simple to verify, all you need do is check your contract to see how you are related to the payment company in question. If you were to look at your contract with us, you'd see that rather than being a nominee you're a sub contractor to Gabem and we are the sub contractor to the end client. That's why at the beginning of every assignment we check with you to see if you are legitimately self employed and ensuring you are compliant and safe.

Thanks for sticking with that. I hope it's shed a little light on what HMRC were getting at, and that it wasn't too dry.

Hugo
09/12/2008

All the installments of Determining Employment Status are here:

Determining Employment Status Part 1 "The Right of Control"
Determining Employment Status Part 2 "Financial Risk and Reward"
Determining Employment Status Part 3 "Mutuality of Obligation"
Determining Employment Status Part 4 "Substitution"

Substitution

So we've reached part 4 of our series on determining self employment, and today we'll be talking about the right of Substitution or just Substitution, the right to send someone to work in your place, or use a helper to assist in the complettion of your work.

Substitution is arguably the hottest factor of the 4 as historically it has the appearance of being so cut and dried; if you don't have the right to substitute, how can you be self employed, and if you do, how can you not be?

There is no doubt that Substitution is a very important factor, but as with all the the other factors it can only really add weight to one side of the argument, it's not the definitive victory that people hope it to be. Some assignments may not allow for substitution for a variety of reasons, programmers working on secret government projects, quite often don't have that option (even if they did contractually how would they exercise that right practically), but that doesn't mean they are employees all of a sudden.

On the other hand you have people with the right of substitution that never exercise that right. This is increasingly becoming a popular line of attack for inspectors from HMRC, if they can prove that the contractual right of substitution doesn't reflect the circumstances on the site itself it can add a lot of weight to any argument they may have for proving of employment.

Both parties you the contractor and they the client, need to accept that the right of substitution isn't just something drawn into a contract it is something that reflects your true status as a self employed contractor.

That's all for now, I hope you all have great weekends, and hopefully I'll have something for you on Monday

Hugo
05/12/2008