Amendments to the National Minimum Wage Regulations came into force on the 1st of January this year and umbrella company contractors should be aware of their implications.
Under the new regulations, expenses for travel and subsistence, that are eligible for tax relief, cannot be included as part of an individual’s national minimum wage.
HMRC and the Department for Business, Innovation and Skills know that there are umbrella business models and travel schemes that claim to be compliant with the new regulations. These schemes claim to save money for employers, but if a worker is paid the NMW, or a sum close to it, it is highly probable that the scheme does not comply.
In the past, some employers have included various expenses in their national minimum wage calculations. Instances of under-recording the amount of hours worked, classing workers as directors, paying expenses for subsistence instead of travelling and making holiday pay adjustments have been ruses used by unscrupulous companies in a bid to avoid tax and NI obligations.
The Revenue intends to crack down on non-compliance and umbrella companies and recruitment businesses could have their dispensation revoked and face additional penalties if they are caught.
Contractors using the services of an umbrella company should carry out due diligence before they sign up. Last year, Bradbury & Co and Sunday Solutions went into liquidation and it was later discovered that they had not paid tax liabilities on behalf of their contractors. Despite the fact that the contractors believed the monies had been paid to HMRC, they now discover they are liable.
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