Guidance on: Government’s Job Retention Scheme ‘Furlough’ & Statutory Sick Pay

 

NumberMill are currently collating advice from FCSA, Brabners, MarkelTax and the REC to support our agencies and contractors with regard to furloughing employees.

Unfortunately the actual ability to claim back from the Government is as yet unclear (the mechanism has not yet been built by HMRC).

This is important as it will significantly affect any business’s cash flow. Other questions that need to be answered are;

  • How the average pay is calculated (relevant where there are different rates and hours being worked as in the temporary market).
  • How ERS’NIC and Apprenticeship Levy is to be funded – Gov guidance on on-costs is unclear and contradictory, so has potential risk.
  • The methodology for reimbursement and cash flow speed.

If you are considering furloughing your temp employees, we would recommend awaiting further information from the Government before you make any decisions.

The guidance regarding Umbrella and Furlough is also as yet unclear, but has the possibility to be a very useful and attractive tool to retain contractors and attract those contractors who are able to find work in the critical supply chain during Corona.

 

Statutory Sick Pay

 

In terms of Day-1 SSP; the emergency legislation for this is still going through parliament, and once it is passed it will be backdated to 13th March.

Given that the government expects all employers to pay SSP from Day 1 for all qualifying employees, it is recommended that you do so.

As you can tell, the situation is changing on a daily basis and we will be keeping you informed of all developments that we are aware of.

It is really useful for us to receive intelligence from the market on the impact of this to your business, therefore please let us know so that we can continue to lobby Government

We will keep you updated regularly where possible.

 

As we are in very difficult times where every penny counts, this could be the perfect time to consider outsourcing your back office and make a significant saving.
Check out our previous mailshot to see how NumberMill can help:
IR35 Review

IR35 Review

An Agency or End Client may choose to pay for their contractors to obtain an IR35 to ensure they are in control of the process

Cost: £125 reduced for quantities over 50

Spotlight 53: Disguised remuneration: using capital advances, joint and mutual share ownership agreements

Spotlight 53:

HMRC warns about a number of schemes designed to avoid Income Tax and National Insurance contributions (NICs) through a combination of capital advances and complex offshore joint (or mutual) share ownership arrangements.

How do these schemes work?

The schemes are claimed to work by either having an employee of an umbrella company or a connected entity, such as an offshore company, to sign a loan or capital advance agreement and a joint (or mutual) share ownership agreement, confirming how their salaries are to be paid by the employer company.

On either a weekly or monthly basis, the employee is paid through 2 separate payments with the first payment representing a nominal salary which results in a payment with little to no Income tax or NICs occurring. The second involves ‘capital advances’, also paid weekly or monthly in the form of loans.

Then, involving an offshore joint (or mutual) share ownership trust, the employer company carries out various share transactions which are said to result in financial gains for the employee, the shares may also attract a dividend for the employee. The employee would also receive statements on a monthly or annual basis stating that their outstanding loans have been repaid as a result of capital gains and dividends even though they may have not been directly involved in the share transactions.

As a result of this process, the schemes attempt to disguise an employee’s earning that would typically be subject to Income Tax and NICs by utilising additional allowances from capital gains or dividends. The employer company attempts to avoid its own tax liabilities as well with this method.

HMRC are very clear that they do not approve of these schemes and any employees or employers caught will result in repaying underpaid tax with interest and be subject to penalties.

What does this mean for tax avoidance promoters?

The recent Disclosure of Tax Avoidance Schemes (DOTAS) legislation allows those involved in contrived arrangements involving employment income related loans to be disclosed to HMRC.

Scheme promoters should carefully consider the DOTAS rules to decide if the arrangements they are marketing should be disclosed to HMRC.

HMRC will pursue anyone who promotes or enables tax avoidance.

More information on the new Spotlight 53 can be found here.

What to do if you’re using these schemes?

If you are using these or similar schemes or know someone who does, it is advised by HMRC to withdraw from these immediately and settle your tax affairs as soon as possible.

Disclosing this to HMRC will allow you to:

  • avoid the costs of investigation and litigation
  • minimise interest and, where they apply, penalty charges on the tax you should have paid

Symptoms of aggressive scheme promoters:

  • Directors with a history of phoenixing companies
  • Directors with hundreds of small companies under them
  • Companies registered offshore e.g Philippines, India & Isle of Man
  • Payslips for an agency using different PAYE references
  • So called FREE schemes – i.e no margin charged to the worker
  • High rebates to agencies
  • High take home pays promised 

Reasons to use NumberMill:

  • FCSA Accredited – the only independently reviewed accreditation for umbrellas – undertaken by Ernst & Young and files passed to HMRC
  • Genuine ACCA and IPSE IR35 accountants offering an agile choice of services
  • CEO – Active HMRC lobbyist – close relations with HMRC intelligence hub
  • CEO background: CFO Adecco and Commercial Director Randstad – expert on contractor and HMRC engagement models
  • All calls are recorded
  • State of the art portals
  • Contracts issued using E-Signatures for efficiency
  • GDPR compliant
  • Partnered with Accountax to ensure all documentation, contracts, processes and practice are efficient and compliant