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Last week I spoke about the reasons companies may disagree over aspects of compliance and the grey areas that still exist within the law. This week I will be looking at what companies are actually trying to comply with.

The MSC legislation introduced in the 2007 budget is one example that should immediately spring to mind and although it was specifically intended for this industry it can obscure other risk factors simply by being so obvious.

That being the case lets get the MSC section out of the way first, the principle way that an umbrella company can fall foul of the MSC legislation is simply not to deduct full PAYE tax and national insurance. Nice and simple, something than any reputable agency should have checked.

From here it gets more mundane, but no less relevant. When working through an umbrella company, you are an employee, if you aren't an employee, it's not an umbrella company, and you should probably be looking for an alternative. You should be treated as any other employee entitled to the same statutory payments and benefits. If an umbrella company were to do anything less, it would be in breach of employment law, indicating that the company in question is not compliant.

Expenses are another area that can get umbrella companies into trouble, any fraudulent claims or failures in their duty of care to HMRC (if they have a dispensation) can make them non-compliant within tax law (and I even have a link for you to HMRC's pdf tax guide). Again this is less exciting than the MSC legislation, but it's no less real an issue.

I'm not trying to scaremonger here, this is more to try to get across the bigger picture. There is no doubt that the MSC legislation is an important thing to bear in mind, but there are other things that you need to be aware of because your agency may not be.

All that said, have a great weekend guys!

Hugo
26/06/2009