Agency tries to enforce PAYE payment

[pcam100]

I use an umbrella company to manage my contract billing, payments and other financial affairs. It is not an offshore company and I pay my fair share of tax to IR. As a director of the company most of my income is paid as a dividend. For my past two contracts the managing agency have required a signed statement from the umbrella company administrators that I will be paid as a PAYE employee and not be paid dividends. In both cases I have been able to work around this requirement.

I have argued with both agencies that my financial arrangements are perfectly legal within all current UK tax laws. I have also pointed out that other than them paying my monthly invoice, my financial arrangements are outside their scope of responsibility and, frankly, none of their business. I have also pointed out that as they have no way of verifying how I get paid, they cannot legally enforce this requirement.

Can anyone provide any more information on why agencies are doing this and what is the legallity of agencies requiring contractors to be paid as PAYE employees?

[swamp]

Are you contracting at a bank by any chance?

[pcam100]

No

[Rebecca Loos]

pcam100,

1) It is legal in the sense that if they want to put a clause on their contract, they can put a clause on their contract - as long as they don't ask you to do anything illegal (and this clearly isn't), then they can. I am sure in the eyes of contract law, it's pretty much a case of "if you don't like it, don't sign it".

2) It is a trend among some agencies to do this as they believe (probably mistakenly but agency and logic are 2 different things) that they will be seen as good guys by the IR. In this, they are behaving no better than subservient teachers pets.

3) If I was you, I'd just say 'yes sir, whatever you want' to them but carry on paying yourself as you like. If they ask for proof as to how you pay yourself, do not tell them (invoke commercial confidentiality or something). I would have thought they cannot legally force you to disclose information like that.


so to summarise, yes they can do it, but no they can't enforce it, so there you go. Sign it and ignore it.

[boredsenseless]

so to summarise, yes they can do it, but no they can't enforce it, so there you go. Sign it and ignore it.

Obvioulsy though you are breaching your contract - so you have to decide what you want to do. i.e. If they had a clause saying that they can't dismiss you without 4 weeks notice, but they do it with only one, would you expect them to uphold that clause?

Simple answer if you have a contract clause you don't like don't sign. I think you'll find that they do have the powers to check how you pay yourself but they'd have to go through the courts to do it.

They are unlikely to do so, but what will they do if you don't comply and they find out - that is the important issue

[John Galt]

I use an umbrella company to manage my contract billing, payments and other financial affairs. It is not an offshore company and I pay my fair share of tax to IR. As a director of the company most of my income is paid as a dividend. For my past two contracts the managing agency have required a signed statement from the umbrella company administrators that I will be paid as a PAYE employee and not be paid dividends. In both cases I have been able to work around this requirement.

I have argued with both agencies that my financial arrangements are perfectly legal within all current UK tax laws. I have also pointed out that other than them paying my monthly invoice, my financial arrangements are outside their scope of responsibility and, frankly, none of their business. I have also pointed out that as they have no way of verifying how I get paid, they cannot legally enforce this requirement.

Can anyone provide any more information on why agencies are doing this and what is the legallity of agencies requiring contractors to be paid as PAYE employees?

I would guess that your agency are well aware that your contract is actually inside IR35 and therefore you are not entitled to draw dividends - I would ask the question as you are on dodgy ground with Bliar and co if this is the case

[Rebecca Loos]

I think you'll find that they do have the powers to check how you pay yourself

Errr... the simple answer to that is 'no'

Your ltd co is not a PLC hence there's no accounts to publish - remuneration is private

[malvolio]

Why they do it is because clients are getting all confused about employment rights and fearful of agency stories about tax raids by a vengeful HMRC, so they are (wrongly) trying to cover themselves by ensuring you are paying all the necessary taxes they believe you owe that nice Mr Brown. Since they can't know the lliability or control it, it is just a little academic; and I would love to hear the court case of one company suing another for paying its shareholders dividends out of profits.

The banking angle is more subtle. Banks are not VAT registered businesses, but some smart bugger has worked out that if you pay the contractor nett, the only VAT due is on the agency's commission, not the whole cost, since the contractors fee is no longer a provision of services. This is being challenged in several renas, not least because one UK company cannot pass its tax liability to another one.

[Lucifer Box]

Your ltd co is not a PLC hence there's no accounts to publish - remuneration is private

Becs, I think you'll find Ltd companies also have to publish accounts, and those accounts do include such choice gems as "Directors Emoluments".

[Rebecca Loos]

yes but do you have to go into details, say you have several directors, do the accounts have to say how much each director got, and also do you have to say whether it's salary, bonus, dividends etc? Didn't think you had to go through as much details?