Reply to: Which umbrella company after April changes?

[farazfastian]

Limited is better...

well well well... first of all thank you all of investing your time in clearing lots of hidden things regarding umbrella companies, I was doing my research as well and can say that most of you are correct. This is what i've found out after doing my research, replies from you guys and talking to some umbrella companies

- That's true every umbrella company(UCs) have different dispensation policy(i.e. they manipulate it as a marketing strategy), dont trust them, its your responsibility to find out that everything is according to Inland Revenue

- Normally UCs charges 60-100 pound per month as thier charges and some charges as % as well but i believe that they save something in Employers NI contribution as well

- The rule of thumb is no matter what dispensation you setup with your UC, you should keep all the receipts of the expenses incurred that means there's no way you can claim false expenses to increae your take home

- Last but not least, I've seen few examples where people faced trouble with UCs in getting salaries on time, claiming right expenses and even in getting proper gross/breakup on your payslips, sometimes even they dont provide the right documentation when you need it

So after analyzing everything regarding UCs i think its more risky in going for UCs and its better to go for Limited Company option atleast things will be in your hand and you can play safe. I'll post a separate thread for questions related to Limited company and hope you guys will reply to me. Many Thanks

Regards
Faraz

[malvolio]

Never understimate the stupidity of greedy people...

[Chugnut]

Not that I'm in this particular boat gladly, but I still find it incredulous that the promoters of these ridiculous expense allowances are not at least somewhat accountable, at least for fraudulent advertising. It was clearly pushed as a concept to harvest clients. Talk about biting the hand that feeds...

[LisaContractorUmbrella]

Agreed Malvolio. If you claim expenses for costs that you have not incurred and cannot prove it will not be your umbrella company that gets in trouble it will be you. Never believe a company that tells you will no have liability from a false claim it is simply not true. You cannot claim expenses without receipts and you cannot claim for costs you have not incurred. This is an extract from a letter we had from the Inland Revenue clarifying the position:

"I can confirm that contractors cannot automatically claim £21 per day (or any other amount) for each day they are at work. It is also worth saying the Inland Revenue would not give general approval of a company's expenses policy. A dispensation would never cover large amounts of unsupported expenditure"

[malvolio]

The employee, for making a false claim. You are solely responsible for correctly declaring your income to the Revenue, that's one of the basic tenets of tax law.

[Newby]

Alright Mal, dimbo here.

If a permanent employee were to be granted expenses incorrectly, and this was brought up in a PAYE audit, who gets it in the neck? The employee or the employer?

[SoupDragon]

To be fair, Prosperity4 do explicitly state that the IR will come after them and not you if there is a problem with the expenses... not that I would touch them with a barge pole.

[malvolio]

**** me there are some dim people out there..

Use an unbrella to get yourself safe from IR35 - as an 'employee' of the brolly it doesn't apply to you - but realise that you are still supposed to be making your own decisions and to be responsible for your own taxation. The brolly are merely advisors and admins, the risks are all yours: if you can't hack that idea, go get a permie job.

[Newby]

Surely it is the employer (the umbrella) that would be at fault for paying/granting expenses to an employee, rather than the employee being at fault for accepting them. I think that the employer is more likely to get asked to cough up for any 'issues' with receipts rather than the employee. It is the risk of the brolly not the employee. PAYE audit anyone?

[LisaContractorUmbrella]

Easy chaps lets not go pointing the "breaking the law" finger at me.

I work in recruitment and am trying to update our PSL of PAYE Umbrellas, Now I know how the majority of you feel "Set up LTD" but a lot of people:

-Don't have time
-Not sure what the future of contracting holds
-Can't be arsed

So instead of me simply saying "do a Google search", I thought I would try and put a few on a list.

Out of the 6 companies I have spoken to, 4 need the contractor to send in receipts for everything except food allowance. Does this mean they don't have a dispensation then?

Just trying to help mate, Please don't think I am trying to do anything dodgy.

Money - it is good that you are trying to put a PSL together but any company you are going to recommend needs to be thoroughly researched to make sure that they will not give your contractors bad advice.

You should ensure that they do not advertise a 'no receipts required policy' - all contractors will need to have receipts to prove to the Inland Revenue that the expense was genuine. You will find that the 'small print' will state that it is in fact the umbrella that doesn't necessarily need the receipts.

You should also make sure that they do not allow a 'daily subsistence' of anything in excess of £5 per day. No umbrella company should process a fixed daily amount for meals or anything else - again, the expense has to be incurred and it has to be proveable.

Some companies charge a percentage of your contractor's income as a fee - you may or may not feel comfortable with this but you should confirm all an umbrella company's charges including sign up or leaving fees

Any umbrella company that advertises 'take home 85% of earnings' will be basing take home figures on over inflated expense claims and any online calculator should ask for a seperate expense figure to be entered - if it doesn't assumptions will be made that cannot be accurate.

Finally stay well clear of any company that advertise an 'Inland Revenue Approved Expenses Policy' - there is no such thing

[ASB]

So if you spend more than what is stated on the dispensation, you just need to provide the receipt to offset it?
Is that right Lisa? I thought you previously said that you needed receipts?

I think Lisa said you need to be able to provide receipts. If claims are within the dispensation then you do not need to provide them to the umbrella, merely the taxman in the envent of an investigation.

Anyway, regarding my example. You are likely to meet whatever admin system the brolly has in place, there are a number of things that may happen:-

1) The brolly cap the claim at £70. In this case the £70 is covered by the dispensation and won't need to go on a P11D. You can claim the remaining £30 through your tax return. Might be as well to add a note.

2) The brolly pay the claim of £100. The £30 should go on your P11D. [I believe it is only the amount in excess of the dispensation that is entered on the P11d]. You show £30 spent and £30 claimed. Your tax return matches the p11d, you get £30 knocked off you taxable income everybodys happy.

[malvolio]

And we are trying to point out that expenses have no part in income generation, that the contractor must retain recepipts for everything claimed and how the umbrella handles its bookeeping and Tax records is nothing to do with the contractor or the agency.In fact, most of us are agreed that any umbrella that advertises income on the basis of expense claims made should not be in business. Use that as your PSL criterion and help stop them fleecing your contractors.

[LisaContractorUmbrella]

You lot are simply trying to make it harder for the poor chap that asked a simple question.

Diffrent PAYE provided diffrent amounts of £ for expenses claimed, therefore it creates something called competition. Also they do charge diffrent rates for their services and there is one umbrella out there that lost is dispensation!

Yes, like Lisa says it is common sence to keep receipts as a contractor you can back up what you say, any suprise audits, receipts lost through the post etc. Is not hard is it?

Sorry Lilfreckles but you have missed the point a bit - competition between umbrella companies cannot be dictated by their expenses 'policies'. The expenses that any contractor can claim are determined by the Inland Revenue and not by the umbrella company. A dispensation allows the umbrella company to process those expenses covered by the dispensation without recording them on a P11D (per standard accounting procedures) - however, it does not mean that the contractor does not have to have receipts to cover that expense. It also does not mean that an umbrella company cannot process an expense claim that is not covered by their dispensation - they will just need your receipt in order to be able to do so.

Please do not be fooled by some umbrella company's marketing strategies - if you claim an expense you must be able to prove that you have incurred the cost and it must have been incurred wholly and exclusively because of your contract.

[Money Money Money]

Easy chaps lets not go pointing the "breaking the law" finger at me.

I work in recruitment and am trying to update our PSL of PAYE Umbrellas, Now I know how the majority of you feel "Set up LTD" but a lot of people:

-Don't have time
-Not sure what the future of contracting holds
-Can't be arsed

So instead of me simply saying "do a Google search", I thought I would try and put a few on a list.

Out of the 6 companies I have spoken to, 4 need the contractor to send in receipts for everything except food allowance. Does this mean they don't have a dispensation then?

Just trying to help mate, Please don't think I am trying to do anything dodgy.

[lilfreckles]

You lot are simply trying to make it harder for the poor chap that asked a simple question.

Diffrent PAYE provided diffrent amounts of £ for expenses claimed, therefore it creates something called competition. Also they do charge diffrent rates for their services and there is one umbrella out there that lost is dispensation!

Yes, like Lisa says it is common sence to keep receipts as a contractor you can back up what you say, any suprise audits, receipts lost through the post etc. Is not hard is it?