The mess HMRC and Treasury has created is unbelievable, all to give corporations like Infosys a competitive advantage.

Unfortunately there seems to be no organisation powerful enough to go after the corruption in those institutions.

It is especially interesting that HMRC seems to be always going after a contractor and not after the umbrella. Wonder why?

Umbrella companies are dire.

Used one once - on first contract (naively thought it might be a good idea, umbrella co contacted me with offer of a role) never again, they provided very little, lots of paperwork, and creamed off a huge amount of cash (got on well with boss I was working for at place I contracted via umbrella, & was told how much they were paying umbrella company - well over double what I was receiving!)

"I was working for at place I contracted via umbrella, & was told how much they were paying umbrella company - well over double what I was receiving!)"

Contractor based for a time at a Pharmaceutical in Stevenage, in my early days working there via a agency, via a MSP (which changed hands about 3 weeks in) to the Pharmaceutical someones wires got badly crossed & I was suddenly being asked to approve the invoices from the MSP.

I noted that it was about 47% above my rate plus VAT, so when agency contacts cry that they (Personally) are not making any money off of me when they match rates to what colleagues (Different agency & less responsibilities) were receiving I tend to turn around & say I'm pretty sure you are as I've been in this game a long time.

Umbrella companies have more money to afford lawyers.

Surely if one is an Employee of an Umbrella Company, it's the company that's liable for their affairs and not you?

" all to give corporations like Infosys a competitive advantage "

Surely not. There can't be any big consulting companies with access to Treasury Executives, Ministers, Chancellors or even Prime Ministers who could possibly influence how HMRC created rules that favour the big international corporations over British workers.

It is especially interesting that HMRC seems to be always going after a contractor and not after the umbrella. Wonder why?

That's not what the article says. The very first line is " Britain's tax collection agency is clamping down on umbrella companies ", and it goes on: " With a large number of umbrella companies suspected of VAT avoidance " and " Umbrella companies are firmly in its crosshairs ". There's no suggestion that this is targeting contractors, quite the reverse.

With the complexity of IR35, lots of contractors are choosing to use umbrella companies to simplify their situation. The article would suggest that there has been a growth in unscrupulous umbrella companies attempting to cash in on this, but not properly managing their own tax affairs, in particular not paying the VAT they should. That's what HMRC is targeting, it shouldn't have any effect on the employees of those companies.

Her^H^His

Someone didn't get the memo?

That gives...

"HeHis"

I think you meant Her^WHis, or arguably even better Her^H^His (because you can hit Ctrl with one hand and H with the other)

Her

^H -> He

^H -> H

is -> His

Oh yeah. Brainfart. Somehow my brain parsed it wrongly, and refused to see the actual letters. Happens all the time at work. Don't tell the boss.

I even went as far as to put the exact same thing at the end, but in my misplaced pedantry failed to spot the 2nd ^ in the initial example.

I think because I just read "His" at the end, and disregarded the ^.

Am I overanalyzing this much, or what?

Wait a minute? Are you all saying The Queen Is Dead!? When did that happen?

If this is an issue about VAT, then it's nothing to do with IR35.

There is no reason for an umbrella company not to be registered for VAT. You charge the VAT on top of your invoice to the client, the client pays it to you and claims it back from HMRC, you pay it to HMRC, and everything is square.

Are they saying that some of these companies are being run as carousel schemes, i.e. the VAT is being charged but not paid to HMRC? Then that's fraud - but it's not limited to umbrella companies.

There is no reason for an umbrella company not to be registered for VAT. You charge the VAT on top of your invoice to the client, the client pays it to you and claims it back from HMRC, you pay it to HMRC, and everything is square.

That's how it works when in scope of IR35 and still working through "PSC". The Fee Payer is invoicing the client on contractor behalf (rate + VAT), then once they receive the payment, they deduct PAYE taxes and then send money to PSC including all the VAT. Then contractor has to do the VAT return and pay whatever they have to pay.

If someone works through an umbrella, then they are no longer a contractor (or should I say they are contractors in name only) but an employee of an umbrella and VAT is not their concern. If HMRC is somehow trying chase employees for the company unpaid VAT to cover up their ineptitude, that's crazy.

Then why just limit that to umbrellas and not go after any worker when their employer doesn't pay VAT? Wow.

Well I am contracting under an umbrella scheme.

The client pays the agency which then passes the money onto the umbrella company they deduct a fee and the tax and send the rest to me. Using the umbrella scheme means I don’t have to vat returns as I am being paid by the umbrella….

Yes, when you work through an umbrella you are their employee, that's why you don't have to deal with taxes yourself, as employees don't do that.

I'm not going to bother looking it up, but i'd bet good money that HMRC are chasing the company director; which is probably also the sole employee.

Your VAT exempt up until a certain point (~£70k IIRC) after which you've got to pay VAT.

So if hypothetically somebody earning £100k has made themselves into a company to avoid the 50% tax rate and is only paying ~£2 a week class whatever NI contributions then HMRC have realised that they can go after them for 20% VAT and is probably doing so with considerable enthusiasm to fill in the gaping hole in the public coffers, a situation not improved by the rich deciding to opt out of paying tax.

Not all VAT can be reclaimed by the company paying the fees; banks in particular can only claim a small portion as their income is VAT exempt (distinct from zero-rated). Banks in particular are generally hit with this as most of their products are rated exempt.

If a company isn't VAT registered, they can't claim back the VAT paid either.

In either case, not charging VAT is a loss to the treasury.

-> Britain's tax collection agency is clamping down on umbrella companies used by contractors to pay their dues

Meanwhile, "perfectly legally" the very rich have offshore trusts where they shovel money, avoiding tax like the plague. People like Michelle Mone, a peer of the realm and studious avoider of tax.

Why does the tax man not go after them? Oh, it's all legal for the very rich to avoid paying tax. But if you are small fry, nail 'em up centurion.

@VoiceOfTruth

"Why does the tax man not go after them? Oh, it's all legal for the very rich to avoid paying tax. But if you are small fry, nail 'em up centurion."

Very true. When they say they will tax the rich more we should realise they cant. Their ability to do so is very limited and the rich can move themselves and their money away from the grubby tax collector. It is the rest of us who get squeezed and increasingly so.

Let's be honest. They are not even trying to tax the rich.

"When they say they will tax the rich more we should realise they cant. Their ability to do so is very limited and the rich can move themselves and their money away from the grubby tax collector. "

That's a myth, repeated ad nauseam to keep the plebs from asking that the rich pay their fair share:

https://www.theguardian.com/inequality/2017/nov/20/if-you-tax-the-rich-they-wont-leave-us-data-contradicts-millionaires-threats

https://www.sup.org/books/title/?id=27987

https://www.nytimes.com/2013/02/16/business/high-taxes-are-not-a-prime-reason-for-relocation-studies-say.html

It's because people (like you) actually believe the myth that taxes for rich people must remain low, else they will just move somewhere else and take their moneys with them, why the bottom 99% has to shoulder an ever increasing financial burden.

All three articles are about the USA. This doesn't really relate to damp, cold and overcast UK.

So in the UK, making the rich pay their fair share wouldn't work?

If that's really the case I guess it's because HMRC don't appear to have any experience in doing that.

Oh, it's all legal for the very rich to avoid paying tax. But if you are small fry, nail 'em up centurion.

It's more a question of scale. If it will cost you 50k to pay a tax lawyer to minimize your tax (legally), there's not much point in trying if you only have 25k of tax to pay anyway. 2.5M tax to pay, that's another situation altogether.

I'm Inside 35. The contracting agency (API cat?) forces me to use an umbrella company, absolving them from any employment fees or obligations. I end up paying employer's NI, apprenticeship levy (intended for companies with more than £3milion pay bill), and employer's pension contribution, on top of income tax and the employee pension contribution. The umbrella fee itself is small. The objectionable part is paying the employer's costs - the agency are operating a scam in plain sight, which HMRC turns a blind eye to. They're chasing the wrong people.

" The objectionable part is paying the employer's costs "

And if you were outside IR35 you would be the director of a Limited Company and, wait for it, you would still have to pay all the Employer portions of the employment as well as your Insurance and probably an accountant, along with all the Pension contributions.

Limited Company does give Directors some flexibility in how they structure their employment and tax status (e.g. paying via dividends is more tax efficient than PAYE), but it is still the same rules that apply to everyone, and one way or another HMRC will get the money the country is owed.