Umbrella companies who refuse to let you draw down your cash?

[bankcontractor]

Hi

I have been with an umbrella company for only 2 months, and they are claiming that due to a change in tax law which basically means that from April 2011, any loan they pay to a beneficiary will be subject to PAYE, they refuse to grant any loans period. So, I have not yet received the bulk of my income for December, and have asked for it only to be told the trustees are not granting any loans at this time. No indication of when they will pay and what the implication will be. They are not responding to further e-mails/ phone calls or anything. Should I be worried, is anyone having the same experience, if I cancel with them can they hold on to my hard earned cash?:

Thanks
L

[RichardCranium]

Is it a conventional umbrella company or an Employee Benefits Trust (EBT)?

[PhilBreeze]

Hi bankcontractor,

There was a change in the tax rules regarding loan payments that does indeed mean any loan payments (that were previously tax-free) made after 9th December 2010 could be subject to full income tax & NI.

A lot of providers/umbrellas have been affected by this and have stopped payments.

If you urgently need the payment for December, you could instruct the umbrella to send the funds back to your agency/client and set up with a new umbrella who can pay you now.

If they are not answering the phone or responding to emails this could be cause for concern although could be explained by the sheer volume of queries that the change in the rules has created for them.

Feel free to PM me if you need further assistance.

PhilCBN

[Al Pidwell]

Umbrella companies who refuse to let you draw down your cash

Sadly it sounds like this is an EBT.

The legislation is being introduced in the Finance Bill 2011, and will become effective from 6 April 2011 onwards. The inclusion of anti-forestalling measures that became effective on the 9th December 2010 mean that from now payments of this type fall within the scope of the new measures.

For contractors, the continued use of EBTs will subject their entire income to PAYE tax and NICs in addition to the fees typically charged by Employee Benefit Trust scheme providers.

Best bet would be to look into a PAYE Employment based umbrella or a compliant Limited Company solution (PSC).

Sadly neither of these options provide the same level of relative take home as an EBT, but thats with good reason, using them means that you pay the full amount of applicable taxes etc.

Thankfully if you have only just signed up with the EBT you won't have "avoided" paying ENI, Income Tax and National Insurance on a large sum, which means you won't be too high on the list of priorities when the inferred HMRC investigation begins.

[Epiphone]

Time for you to get a real brolly/LTD and not some fly-by-night off-shore scumbag who made you wet your knickers with promises of a 90% return.

[TykeMerc]

Time for you to get a real brolly/LTD and not some fly-by-night off-shore scumbag who made you wet your knickers with promises of a 90% return.

The language is a bit excessive for the Accounting/Legal section, but the import of your post is correct.

The EBT loophole has been closed, it's time for bankcontractor to find a suitable payment solution.

[Wanderer]

I have been with an umbrella company for only 2 months, and they are claiming that due to a change in tax law which basically means that from April 2011, any loan they pay to a beneficiary will be subject to PAYE, they refuse to grant any loans period.

It sounds like they haven't figured out what they are going to do under the new rules. If I were you, I would make sure they don't get another penny of your money and that means talking to the agency, cancelling the contract and taking out a new one through a reputable umbrella which will pay you via PAYE or engaging with an accountant who understands contracting and forming a Limited company.

[Steven@Parasol]

It sounds like they haven't figured out what they are going to do under the new rules. If I were you, I would make sure they don't get another penny of your money and that means talking to the agency, cancelling the contract and taking out a new one through a reputable umbrella which will pay you via PAYE or engaging with an accountant who understands contracting and forming a Limited company.

A quick search of this forum and others will uncover plenty of reputable umbrella companies (who have nothing today with racy offshore schemes) and experienced specialist contractor accountants.

Its unblievable the amount of marketing material I'm seeing from EBTs who seem to be glossing over the Finance Act 2011.

[LisaContractorUmbrella]

Despite the best efforts of our friends at HMR&C there will always be schemes out there that will 'guarantee' a huge return. Unfortunately the providers are generally a little economical with the truth about the way the scheme works and who will be liable for any additional taxes/penalties in the event that their 'respected tax QC' has actually got it all wrong