Umbrella company expenses and dispensations come under close scrutiny by the Government
Contractors, working through umbrella companies and employment agencies, who claim for expenses that they have not incurred or embellish their expense claims need to be very careful following the government’s latest attack on umbrella companies.
Everybody knows that certain umbrella companies have always focused their marketing activities, not on the quality of their service but rather on the supposed high net income their clients can pocket through the heavy abuse of dispensations and expenses claims. For years it seemed that HM Revenue and Customs turned a blind eye to this shady practice.
However, following a recent consultation paper issued by the Revenue (July 2008) it looks like they are about to tighten up the rules for contractors, interim managers and freelancers who use employment agencies and umbrella companies to increase their net pay through the use of fraudulent expense claims.
The paper focuses on the practices of over 100 umbrella companies for encouraging contractors to claim tax relief on non allowable expenses. One such company claimed contractors would be able to pocket 85% of their contract value which is laughable under PAYE rules. HM Treasury claimed widespread abuse of the rules for travel expenses has deprived the Exchequer of £300m in tax.
In the paper, Treasury officials warned that where expenses rules are being abused, that abuse needs to be addressed. Time will tell how stringent the new rules are going to be but one thing is for certain and that is that the days of ‘boosting your income’ with dubious expense claims are over.
Working through an umbrella company will obviously still remain an attractive option for many contractors, which isn't surprising bearing in mind most contractors earn more than their permanent employee counterparts.
When choosing an umbrella company contractors should focus on whether they believe the umbrella is an ethical company who would always provide best practice and safe advice. Other things to look for when choosing an umbrella company are: published service levels, will the contractor get paid even if the umbrella hasn't been and do they hold any professional accreditations or are members of professional trade bodies. One such company is our very own sister company ContractorUmbrella who provide all of the above.
As always contractors who are looking for an administration free life should look towards an umbrella solution. Whereas those who are prepared for a little more administration should look at the limited company route which remains the most tax efficient method possible.
To read more about the differences between Limited and Umbrella click here to read of comprehensive guide.
If you have any questions about contracting or would like any further advice please call our New Client Services helpdesk on 0500 152 500 / 01442 275789 or e-mail michelle.turbutt@sjdaccountancy.com
Other useful pages, guides and case studies include:
Take home pay through a limited company – The differences between limited and umbrella companies
Take home pay calculator - How much could you be taking home
First time Contracting or Freelancing? - A summary of the alternatives along with pros and cons
Step-by-step Guide to Contracting - Download a FREE copy of our guide
Limited or Umbrella? Can't decide? - We help you decide which is best
Take home pay case studies - Examples of contractors using a ltd co. & umbrella co
Umbrella company guide - Everything you ever wanted to know about umbrella company services
IR35 Guide - A great plain English guide to IR35
About SJD Accountancy
SJD Accountancy are the UK's largest specialist provider of fixed fee, limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 11,000 clients.
We are the only National specialist firm of accountants with offices in all major UK cities so you’ll never be far from your accountant. SJD also have more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATII, ATT, ACCA, CA, ACA, FCCA, ACMA. You’ll also be pleased to know that we are one of the lowest priced as well.
SJD have also won every relevant industry award possible, including:
- Best Contractor Accountants - Contractor UK 2011 - 2007
- Accountant of the Year - The British Accountancy Awards 2011
- Best Professional Team of the Year - UK Customer Experience Award 2011
- Customer Commitment Award - Institute of Customer Service 2011
- National Chamber of Commerce Award 2010
- Medium firm of the Year - Finalist Accountancy Age 2010
- Excellence in Customer Service - Finalists National Customer Service Awards 2009
- Sunday Times Best Small Companies - Award 2009 - 2007
- Small firm of the Year - Accountancy Age 2007 & 2004 and finalists in 2010 and all years since 2003
- Deemed PCG accredited accountants and fully MSC compliant
We offer all clients:
Free face-to-face meetings. This is another unique service, only SJD offers free face to face meetings - tax is complicated and sometimes only a meeting will do.
Unlimited access to your own dedicated accountant. No call centres, no outsourcing, no automated call handling. Simply telephone, e-mail or meet your own dedicated accountant face to face.
Money back service guarantee. All your telephone calls and e-mails will be answered the same day or we will refund your monthly fee's.
Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market.
All inclusive low cost monthly package which includes completion of accounts, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, unlimited access to your accountant and all company returns.
All this for a fixed monthly fee of £110 plus VAT, which is one of the lowest prices in the market. And most importantly, in a recent survey 98% of our clients rated SJD as 'better than other accountants' - we are working hard to convince the other 2%!
If you have any question about contracting or would like any further advice please either contact your SJD Accountant or call our new client services helpdesk on 0500 152500 / 01442 275789 or email: michelle.turbutt@sjdaccountancy.com.
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