Feeling stupid and just getting started on this

[Saleos]

"Company B have emailed me this morning stating that their scheme was legal (employer to employee loan) and have even included a letter from HMRC to that effect".

Some sense check questions for any "umbrella" users.

1)Where is Company B tax resident? Loans to employees aren't deductible against profits for UK CT purposes so how does it pay its Corp Tax if it pays out 85% of funds to Ees?

2) If it is claimed to be non-UK resident is it genuinely so? Who do you deal with? Where are they based? Backtrace their IP address.

3) Remember that Part 7A (the legislation often but misleadingly described as the "disguised remuneration" rules) applies where a payment of a sum of money is made by a relevant third person (anyone but the employer or employee) to a third party. That includes anyone at the direction of the employee. So if you "choose" to enter into a scheme which "is (wholly or partly) a means of providing, or is otherwise concerned (wholly or partly) with the provision of, rewards or recognition or loans in connection with your employment" you have chosen to have funds paid by a 3rd party (the end client or agency) to a person of your choosing (Company B).

Unless the Employer can give a cogent answer to explain why that isn't the case, leave that arrangement.

ALWAYS get a second opinion from someone not associated with the employer (it may be necessary to demonstrate "reasonable care" later when HMRC raise the issue of penalties - as users of PBW schemes find out).

ALWAYS be sceptical.

If all of this is too late seek expert, pragmatic, advice.

[oldjake]

Have you included interest and penalties in your "£90K deep" calculation?

Possibly. I did some more calculations yesterday. My rate was much less back then so I'd probably overestimated when I thought it was 90k. I think I'm probably looking at £60k for the tax. Plus penalties and interest.

[oldjake]

Company B don't show up if I do a Google search. But I'm resigned to the fact that I'm going to get hit for the time I was with them. Right now, I'm unsure whether to just give HMRC what they're asking for - 1 year - or just to cough for the lot.

[Paralytic]

Have you included interest and penalties in your "£90K deep" calculation?

[northernladuk]

Based on the payment practices of company A and B could there be a chance they will hit the naughtly list if they are not already on it? Is there a possibility they've already dropped off the naught list as I believe it's on a 2 year cycle or somethign isn't it?

Company B will of course argue it's legit. The ones on the naughty list still say they are legit and a letter from HMRC is easily faked. Have you researched them on the web. As a last chance catchall you could do the google search on here to see if someone has mentioned them before.

In Google type <company name> site:forums.contractoruk.com and it will bring back all the threads with those keywords in.

[oldjake]

Hi all

I don't know how much I should disclose here so I'm not going to name companies. Long story short, I was in an umbrella company's "enhanced scheme" for 3.5 years - my first experience as a contractor. Yes, I was stupid. But I was assured several times that these schemes were completely legit. I got out and went properly legit in 2021.

Couple of days ago I got a bunch of paper from HMRC informing me that they want to do a compliance check on me for the tax year 2020 to 2021.

• I was with the same umbrella company from December 2017 to July 2021 - I'll call this company A
• From December 2017 to around November 2020 I was in one scheme where I received my salary and a loan - I'll call this company B
• From November 2020 to July 2021 the umbrella company swapped me to another scheme where I was paid a salary and some sort of annuity - I can't remember the details. I'll call this company C

Company A and company B are not on the naughty list on this forum or on the gov site. Company C is on the naughty list.

Company A aren't being too helpful. Company B have emailed me this morning stating that their scheme was legal (employer to employee loan) and have even included a letter from HMRC to that effect. Company C seem to have disappeared.

If I get caught for the whole 3.5 years then I reckon I'm about £90k deep. If it's just for the year they're asking about, probably £20k.

If I just hold my hands out and go down the "It's a fair cop gov" route with the compliance check, can anyone give a reasonable prediction of how this might end?

Just to add, I'm trying to look at this pragmatically. I haven't lost anything. I'm still on the fence as to whether I'm entitled to feel like a "victim" or just plain stupid.