"Huge" umbrella company problems

[seanraaron]

Let me apologise in advance for the length of this post. Believe me if it was a full transcript it would be a lot longer!

I only started contracting last November and I'm already seeing some serious issues with my umbrella company around areas of tax withholding and expenses that have left me wondering if I'm looking at a bad time with the tax man down the road. On top of that I'm getting some rather poor customer service from the person who is supposed to be my handler with the organisation and they have acknowledged some screw-ups with the way my time sheets have been recorded in the pay tracker.

I signed up with these guys because they've received loads of awards, included one for best umbrella for years running from this very site, but the nature and number of these problems is so great that I have to conclude one of the following:

A) many people don't look closely at their numbers and are happy just to get paid on time
B) I'm fantastically unlucky in contracting
C) my previous 25 years of experience with HR and payroll departments in the public and private sector was an amazing stroke of good luck.

Initially the problem was my tax code changing. This didn't get flagged up to me in advance like a normal HR/payroll department would and I had to sort it out myself with HMRC because that's apparently not one of their functions. I suspect HMRC only changed it in the first place because of something the umbrella did as they seemed to think I was going to make over £100k in the current fiscal year ending April, but umbrella says they just blindly apply whatever tax code is sent to them.

The correction was to have resulted in a tax rebate of some kind, but after multiple assurances I'd get this paid Friday and much obstruction stating they couldn't estimate it in advance (again, unlike any company payroll department I've ever dealt with), it hasn't appeared. Additionally I've (belatedly) downloaded my payslips and see stuff that makes no sense, primarily around expenses, which has me concerned.

I've been claiming travel expenses for a weekly underground ticket and the occasional one-way train ticket from my partner's place as they've advised I could. After reading here about the impending end of these expenses in April and the disallowance of said expenses when you're going to only one site in a tax year I thought I'd get some reassurance so I don't end up paying this back. I was told, no, that wouldn't be a problem.

I looked at my old payslips and the very first has not only expenses of £100.73 (I submitted £18.30), but only £2.60 of tax withheld. Now when I first got paid and the amount was substantially higher than expected I called them and asked "did they get my tax code wrong?" I was told there was a rebate because I overpaid in the course of the year. I would naturally have thought a rebate to appear as a separate line item in the payslip, so now I'm really wondering what is going on here.

So I have sent a message saying my confidence in them is very low (actual words "I don't think you guys know what the hell you're doing") and asked for someone to call and clarify things for me (actual words "someone had better contact me and explain what the hell is going on").

I'm just wanting to know if my experience is unusual and if I have a big problem looming with HMRC, because I think by April I would have racked up more than £100 in expenses, but any auditor would rightly look and say "Okay, you're getting paid £18/week most of the time, but in your first payslip it's £100.73 and the subsequent two is nothing, so what are you trying to pull here?" - especially when my receipts won't match that. Should I run screaming while I still can and can this be fixed?

[NotAllThere]

So... what's the problem?

[northernladuk]

Are you having Giant problems with them or is it just you Paystream that's not going well?

[seanraaron]

So... what's the problem?

I think my GIANT umbrella company is potentially setting me up for an unpleasant date with HMRC because they've been screwing up my tax withholding and expense claims from day one. I've had five pay days from them so far; I trust one of them to be correct - maybe.

Needless to say I went with an umbrella company to avoid having to worry about this stuff and after I've gotten some more time in the game I will seriously consider switching to an accountant and the limited company route just to not have to deal with them, but damn, I thought I'd go more than a month of contracting without something like this. I also thought recruiters and clients would be my biggest issue, not the umbrella...but live and learn.

Has anyone else had something like this happen and aside from keeping all my correspondence where the umbrella cops to effing things up, is there anything else I can do to cover myself? I'm guessing have a stash of cash and being ready to sue the umbrella if need be, but I'm wondering if there's anything proactive I can communicate to HMRC?

[ASB]

One cannot tell if anything is wrong withou knowing

you tax code
toal pay to date
toal tax code to date

though blindly applying a tax code whether it is right or wrong is whst one is legally obliged to do.

you description does not demonstrate a massive problem to me.

The expense could be if they are just "standard default" amounts rather than those you have actually incurred.

[LisaContractorUmbrella]

I think my GIANT umbrella company is potentially setting me up for an unpleasant date with HMRC because they've been screwing up my tax withholding and expense claims from day one. I've had five pay days from them so far; I trust one of them to be correct - maybe.

Needless to say I went with an umbrella company to avoid having to worry about this stuff and after I've gotten some more time in the game I will seriously consider switching to an accountant and the limited company route just to not have to deal with them, but damn, I thought I'd go more than a month of contracting without something like this. I also thought recruiters and clients would be my biggest issue, not the umbrella...but live and learn.

Has anyone else had something like this happen and aside from keeping all my correspondence where the umbrella cops to effing things up, is there anything else I can do to cover myself? I'm guessing have a stash of cash and being ready to sue the umbrella if need be, but I'm wondering if there's anything proactive I can communicate to HMRC?

Why did you think that the umbrella company would be able to advise you of a tax code change in advance??? The only information available to them when you registered with them would be contained within your P45 and there would be no guarantee that the information would be correct - employers do make mistakes some times. The information from your P45 and your tax and NIC's paid from your earnings would be sent to HMRC via RTI; if they then feel that the tax code you are on is incorrect, they will notify your employer i.e. the umbrella company. No employer would make an adjustment for a possible over/underpayment of tax without notification from HMRC that they should do so.

With regard to expenses - had you submitted £18 in that period only or could it be that there were expenses processed from a previous period as well? If you have only ever submitted £18 but they have processed £100 then there is an issue which could cause you problems in the future as you will have paid too little tax on your earnings as you will have received tax relief that you're not entitled to. The amount of tax paid in the period could be down to any number of things - the most likely is that you had a gap between payments which means that you're tax free pay had accumulated (assuming you are not on a week 1/month one, BR or D0 tax code) and therefore the income on which tax was due would be lower than if there had been no gap.

To be able to answer properly we really need a bit more information and some figures to work with

[seanraaron]

I would expect them to advise me of a change in the tax code certainly. Every time there has been a change in the past, due to a change in tax policy or because my pay pushed me into a new bracket I've had payroll/HR notify me. I suppose it's possible I've just worked for employers with superior payroll/HR departments, but they weren't perfect so I doubt it. Seems like common sense to me to advise staff when something has changed that may impact their pay.

With regards to expenses, as I noted I've just started with these guys and this is my first time contracting. The only "gap in pay" I would have would be the time between my being redundant and starting my current contract which is less than three weeks. I am being paid 28 days in arrears by the agency (which is crap - I hope that's not "industry-standard"), but I can't see why that would matter since they didn't start paying me until they started receiving the money from the agency. Their own online records match mine, so I cannot see how my very first payslip could have that massive an expense claim or why the amount of withholding for tax and NI is so inconsistent unless they're just playing with numbers.

When I asked about the tax code thing they told me what it was initially (1031L) then then what it changed to for two periods (969TW1) and that what they were initially using matched what HMRC said they were putting it to on the phone (again, back to 1031L). I'm also aware that in the absence of my P45 they might use an "emergency code," but that doesn't appear to have happened here, but then I'm actually trusting that this information provided by them is correct; quite frankly I don't think I can trust anything they say at this point!

[LisaContractorUmbrella]

I would expect them to advise me of a change in the tax code certainly. Every time there has been a change in the past, due to a change in tax policy or because my pay pushed me into a new bracket I've had payroll/HR notify me. I suppose it's possible I've just worked for employers with superior payroll/HR departments, but they weren't perfect so I doubt it. Seems like common sense to me to advise staff when something has changed that may impact their pay.

With regards to expenses, as I noted I've just started with these guys and this is my first time contracting. The only "gap in pay" I would have would be the time between my being redundant and starting my current contract which is less than three weeks. I am being paid 28 days in arrears by the agency (which is crap - I hope that's not "industry-standard"), but I can't see why that would matter since they didn't start paying me until they started receiving the money from the agency. Their own online records match mine, so I cannot see how my very first payslip could have that massive an expense claim or why the amount of withholding for tax and NI is so inconsistent unless they're just playing with numbers.

When I asked about the tax code thing they told me what it was initially (1031L) then then what it changed to for two periods (969TW1) and that what they were initially using matched what HMRC said they were putting it to on the phone (again, back to 1031L). I'm also aware that in the absence of my P45 they might use an "emergency code," but that doesn't appear to have happened here, but then I'm actually trusting that this information provided by them is correct; quite frankly I don't think I can trust anything they say at this point!

OK, firstly, a tax code will change for lots and lots of reasons but your umbrella company could not reasonably be expected to be aware of at least half of them. If you have earnings from another source, your tax code will not be standard, if you had a company car in your last job it won't be standard and would be likely to change when you move to umbrella, if you under/over paid tax in your last job your tax code will be adjusted. If tax code changes are global because HMT have raised the tax free allowance then I would expect that your umbrella company would let you know that those changes would be taking place. If your earnings show that you are likely to hit £100k plus for the year then I would expect the umbrella company to tell you as, at this point you begin to lose your tax free allowance and, if HMRC don't change your tax code then it can have a big impact. Other than that I would expect your umbrella to only notify you of a change of tax code when they receive a coding notice from HMRC and not before.

You have said that you had at least a 3 week gap between payment from your permie job and your first payment as a contractor - this could account for the low tax paid. If you were weekly paid in your old job and weekly paid under the contract then you will have amassed 3 weeks tax free allowance against a single week's earnings. Again, without more information this is all guesswork - if you want to email the payslip I'll be happy to have a look at it for you and see if I can put your mind at rest - [email protected]

With regard to expenses - if they have processed £100 when you have only incurred costs of £18 then there is an issue as your umbrella company is obviously 'assuming' expenses rather than looking at actual costs. You should ask them what information they are basing their figures on and, if they can't answer, find another umbrella company.

P.s. 28 days payment terms are not unusual at all

[seanraaron]

Cheers for that. The payslips are about as detail-free as I've ever seen - also a concern.

My permanent job paid monthly; I had no benefits like company car or anything - pretty basic, really.

I appreciate what you're saying about them not knowing the reason for a code change; I just would have thought when it changed they might have said something. As it was when I phoned to ask "why have I been paid a short week back-to-back" and they said "you haven't, your tax code changed a week ago," I was kind of surprised. I mean I thought it had only been changed for the most recent lower-than-expected pay period, but despite net pay being higher-than-expected the week before it apparently was applied to that as well. I'm sure you can understand my confusion since my withholding has been higher in the four-day work weeks than in the five-day ones by a factor of two(!).

I'm not an accountant, but I'd love to see some consistency between at least two weeks. Needless to say I'm finding it impossible to work out any kind of budget since my net pay is proving a bit of a lottery.

[TheFaQQer]

I would expect them to advise me of a change in the tax code certainly. Every time there has been a change in the past, due to a change in tax policy or because my pay pushed me into a new bracket I've had payroll/HR notify me. I suppose it's possible I've just worked for employers with superior payroll/HR departments, but they weren't perfect so I doubt it.

When I was permie, whenever my tax code changed, HMRC would write to me and tell me - I never heard from the HR departments.

Now I run my own business, whenever my tax code changes, HMRC will write to me and tell me.