National Insurance Jiggery Pokery

So, I requested some illustrations from a few Umbrella companies in the UK for managing a contract in the Netherlands. One of the payroll models payed National Insurance in the UK (fine no problem) and paying income tax in the Netherlands. All reasonably happy with that but questioned the amount being paid for NI which seemed low to me. Explanation was that the 'set salary' was set at the Upper Threshold for NI (effectively capping the NI). The rest was classed as 'Bonus Income' and therefore only declared for income tax in Netherlands.

I asked the obvious questions but they couldn't point me to anything that would confirm it as being compliant. I tried HMRC but gave up after being on hold for 45 minutes.

Anyone else been given this pitch, or even operated under it? I can't believe it is legit and you know what they say about too good to be true!

[International Adviser]

International Adviser

It is difficult to fully advise you, but what must be understood is that a lot of UK Legislation has geographical limits and it may be that the company involved are making use of the exemptions in the anti-avoidance legislation that apply to individuals working for clients overseas.

I would imagine what they have shown you is not the full picture and why would they given the highly competitive nature of the Umbrella market.

The question you really should be asking them is what is the potential risk to you. If they confirm to you that there is no risk under the Managed Service Company or IR35 Legislation than I think you can rest easy. The new agency legislation cannot result in a transfer of debt to you in any case.

If on the other hand they are splitting your income and sending money via Switzerland and not paying taxation to the Dutch or reporting the Income to the UK Authorities then your concerns are founded, but as your post suggests this is not going on then as long as you get proof of taxation paid to the Dutch Authorities then you should be able to claim Tax Credit Relief in the UK.