Published on Thursday 18th November 2021, the government has released some online guidance to help agency workers and contractors who have used the services of umbrella companies. The guidance involves the user answering a series of questions. Once the final question has been answered, a screen appears with guidance relating to the responses. If you complete the questionnaire and HMRC believe you’re at risk of tax avoidance, advice on settling your tax affairs appears. Keep reading, and we’ll explain more about the new guidance, as well as links to it so you can see it for yourself.
Are you at risk of tax avoidance?
Referred to by the government as an “interactive risk checker“, a new online tool has been published to help contractors and agency workers determine whether they are at risk of tax avoidance because of unethical and non-compliant umbrella companies. As stated in the guidance, it is essential to remember that “you are legally responsible for your tax affairs and for paying the correct amount of Income Tax and National Insurance contributions, even if somebody else does this for you.”
Check if you are at risk of tax avoidance by visiting the government’s website.
Before you start using the interactive risk checker
The guidance advises you gather the following documentation before you start answering the questions that’ll help you identify if you’re at risk of tax avoidance.
- Payslips
- Bank statements
- Payment advice
- Employment contracts or agreements
- Key information document (KID)
- Any other documents you have relating to your employment arrangements
You are also advised to check the following before you interact with the online tax avoidance checker.
- Double-check your employment arrangements involve working through an umbrella company.
- Have a look at your umbrella company payslip and see the Income Tax and National Insurance Contributions.
- If you do not get a payslip from your umbrella company, check your Personal tax account online.
- Gather the documentation listed above, and any additional paperwork you received when you registered with your umbrella company.
What questions does the tool ask?
To find out if you are at risk of tax avoidance, you are required to answer a series of questions with a “yes” or “no” response. The questions are:
- Do you work through an umbrella company?
- Have you been told your take-home pay will be higher than expected?
- Have you received more pay than your payslip or personal tax account shows?
- Have you been told that part of your pay is not taxable?
- Has your pay been topped up with another payment?
- Have you received your pay in more than one payment?
- Has Income Tax and National Insurance contributions been deducted from the additional payments?
What are contractors and agency workers advised to do if the online tool suggests you may be at risk of tax avoidance?
If your responses to the questions above lead the tool to believe you may be at risk of tax avoidance, advice will appear on screen. This advice includes:
- If you are involved with a tax avoidance scheme, you could face a large bill, plus interest. You could also be faced with additional penalties.
- You should get help with tax and more advice is available at the following link on the government’s website – Get help with tax.
- Seek assistance and advice from Tax Aid – a charity designed to help those on a low income.
- Find out more information about tax avoidance.
- If you want to get out of a tax avoidance arrangement, email HMRC’s Counter Avoidance Campaign at the following email address – counteravoidancecampaign@hmrc.gov.uk.
- Contact HMRC’s Fraud Line to report people or businesses offering tax avoidance arrangements.
Please click here to take the questionnaire for yourself.
With over 500 umbrella companies to choose from, how do you pick a compliant payroll provider?
The UK marketplace is overflowing with umbrella companies – over 500 to be precise. With so many umbrella companies to choose from, how do you know where to start?
We highly recommend you only consider using the services of an FCSA or Professional Passport accredited umbrella company. For an umbrella company to achieve these prestigious accreditations, they must prove they operate in full compliance and transparency with HMRC’s rules and regulations by undergoing a series of strict audits and assessments.
For more information, we recommend you visit the FCSA and Professional Passport websites.
Top 10 umbrella companies
If you’re looking for a compliant umbrella company with excellent customer service, you’ve come to the right place. We have collated a list of our top 10 umbrella companies, and they’re all accredited by either the Freelancer and Contractor Services Association (FCSA) or Professional Passport. And, some of the umbrella companies in our top 10 have special offers at the moment. Please go and check them out now!
