Does using an umbrella increase likelihood of HMRC Inquiry?

[james14]

As noted on another thread, I have my first contract job. For the first month I am paid by my recruitment consultants rather than my employer. They tell me they 'outsource' their payroll.

Instead, they use Parasol. Judging by the myths listed on other threads about subsitence etc., if I were an Inspector of Taxes, I should target 'employees' of umbrella companies for investigations into their expenses claims - encouraged by the umbrella companies.

By being employed by Parasol do I increase my risk of a tax inquiry - compared to being employed by my employment agency, a 'reputable' company, using an outsourcing company,

What do you think? Many thanks

[Cowboy Bob]

Best get your asbestos suit on mate...

[james14]

Why...? I'd never heard of an umbrella company before 11.30 today.

[malvolio]

Why would you get an IR35 enquiry if you are using an umbrella? How much more tax would they expect you to pay, since you are already paying full PAYE and NICs? If you are with an umbrella (or an MSC, come to that), IR35 does not apply.

If you do get a taxation inquiry though, as a result of faulty accounting or somesuch, sue the umbrella. You are paying them to ensure such things don't happen.

[Damo1176]

and don't forget if you claim subsistence be prepared for Hector to shoot you down over it or at the very least expect receipts.

Umbrellas should be told to buck their ideas up and not allege to all their employees they can claim subsistence but if my umbrella says I can claim providing I keep receipts then I will and the umbrella can hang on my behalf if Hector does not like it.

[james14]

I'm not talking about an IR35 inquiry, Malvolio. Just a straightforward inquiry into my tax return - specifically my Schedule E deductions.

If umbrella companies are in the habit of encouraging excessive Schedule E deductions, then it is a prime place to open an inquiry.

£5 per day for lunch, is £250 of tax a year. Multiplied by 6,000 contractors - say half of whom are overclaiming - that is a lot of money

[gingerjedi]

I thought umbrellas strike a deal with HMRC and they agree what level of SE can be applied, so just stick to what they say and keep the receipts that they ask you to keep.

Of all the contractors I work with who are over the 24 month limit all are still claiming travel saying that because our client has changed the rule does not apply to them, I am the only one playing by the rules so I think this is where they’re more likely to crack down not a piddley £1 a day.

[Cowboy Bob]

I thought umbrellas strike a deal with HMRC and they agree what level of SE can be applied, so just stick to what they say and keep the receipts that they ask you to keep.

No they don't. They strike a deal where they don't have to be responsible for auditing any claimed expenses or recording it on your P11D. The value of their dispensation has absolutely nothing to do with what you can and cannot claim. So stick to the actual rules and keep all receipts.

[tino]

As noted on another thread, I have my first contract job. For the first month I am paid by my recruitment consultants rather than my employer. They tell me they 'outsource' their payroll.

Instead, they use Parasol. Judging by the myths listed on other threads about subsitence etc., if I were an Inspector of Taxes, I should target 'employees' of umbrella companies for investigations into their expenses claims - encouraged by the umbrella companies.

By being employed by Parasol do I increase my risk of a tax inquiry - compared to being employed by my employment agency, a 'reputable' company, using an outsourcing company,

What do you think? Many thanks

You don't increase the likelihood of anything if you do what you should do and Don't claim expenses

[Bluebird]

You don't increase the likelihood of anything if you do what you should do and Don't claim expenses

eh ?

what do you mean ?