Umbrella companies with Dividend and shares offer

[MangoRepublic]

Hello,

I was wondering if someone help me with this.

I have always worked as a permanent employee under PAYE. But i am getting a contractor role now with a very decent daily rate but i will have to go through an umbrella company. I have been reading a fair bit about the Umbrella companies and contacted a few of them. A lot of them seem to offer a similar take home package, but a few of them said they can increase my take home pay by

1. Paying me dividends so i can pay a lower tax rate instead of Income tax.[ Almost 60% take home]
2. Offer me shares which i can exchange every month and i can pay a capital gains tax instead of income tax. All this will be disclosed to HMRC and it is completely legal according them. And all of these transactions happen in the background i will be paid per month and i just need to pay for accountant[Almost 65% take home].

Just wondering if these methods are legal and if so anyone else is doing this?

Thanks

[cojak]

Legal? It’s a grey area.

But HMRC are very likely to tell you to pay the right amount of tax and they won’t care if you’ve paid money to an umbrella that will probably shut down before they get caught.

[eek]

Legal? It’s a grey area.

But HMRC are very likely to tell you to pay the right amount of tax and they won’t care if you’ve paid money to an umbrella that will probably shut down before they get caught.

It's not a grey area

Look at the HMRC scheme enquiries forum where HMRC says income that is earn as income needs to be taxed as income (remember agency reporting tells HMRC who much should be coming).

And if you have been told you have to use an umbrella company than the contract will be inside IR35 (as determined by the end client) and HMRC will be expecting the correct amount of tax to be paid.

So use a legitimate umbrella firm that isn't offering schemes as they don't work. They may save you some tax short term but hmrc will find out and will ask for the missing tax and will probably ask for 100% fine on top

[MangoRepublic]

Many thanks for your response.

[Paralytic]

Legal? It’s a grey area.

It's not a grey area

Out of interest, which laws are being broken and by whom?

Is the contractor actually breaking any law at the point of signing up to such a scheme?

[eek]

Out of interest, which laws are being broken and by whom?

Is the contractor actually breaking any law at the point of signing up to such a scheme?

Believe it or not, the most obvious one would be the agency for not accurately checking the compliance within their supply chain.

For the worker knowingly working to avoid paying the PAYE involved is likely to be one as well (it's far closer to evasion than avoidance) but I would need to check the details.

The agency one is obvious given Why the Criminal Finances Act 2017 poses problems for non-compliant supply chains - Orca Pay Group but its easy to see how the worker might get done if he was the person who introduced the scheme to the agency especially as he would be the person profiting from the scheme (short term access to cash where tax should have been paid is regarded by HMRC as profiting).

[lucyclarityumbrella]

Irrelevant of anything else HMRC see it as a contrived scheme, and they won't like it, so you would end up on the wrong side of the revenue!