The BBC recently reported that around 48,000 mini umbrella companies had been created in the past five years. It was also reported that 40,000 people in the Philippines have been recruited to front these British companies.
The reason for this is that it is a ploy to reduce recruiters national insurance contribution.
The way it works is that when you are taken on you are employed by a company set up solely for that purpose and to employ a handful of other people. You are not a director, nor are you a shareholder. Your tax and National Insurance are accounted for in the usual way. You are probably totally oblivious to the scam.
These companies claim the Employment Allowance currently £4000 per annum and make use of the flat rate scheme to mitigate the VAT cost. Neither of these would be available in this way if everyone was employed by the same company. Because they have a short life, they are frequently struck off still owing significant amounts of tax and NIC to HMRC. The normal employment protections for employees are also likely to be ignored.
The story came to light after workers at the NHS Test and Trace service raised concerns that their payslips did not list the normal outsourcing companies like G4S as their employers, but an unknown company. One worker told the BBC programme that they looked up the company on Companies House and discovered the director was from the Philippines and the company was set up a month before he started.
HMRC issued guidance and warnings of the potential dangers posed to legitimate business if they are ffound to be utilising., however unwittingly, mini umbrella companies in their supply chain. HMRC consider this to be fraud.
HMRC reminds businesses that as an end user or provider of temporary labour, it’s their responsibility to be clear who pays the workers and to check the credibility of the supply chain.
So, what are the warning signs to look out for:
- Unusual company names: Is the registered address suitable for the type of business activity?
- Unrelated business activity: Are the business activities listed on Companies House related to the service provided by the workers?
- Foreign national directors: Have they got any experience in the UK labour supply industry?
- Movement of workers: Have the employees moved between different Mini umbrella companies?
- Short-lived businesses: These companies have a short lifespan – often less than 18 months.
HMRC said that it is using civil and criminal powers to challenge those who are involved in and facilitating this type of fraud. HMRC also confirmed that it had deregistered more than 22,000 mini umbrella companies.
Tax relief for NHS workers
It was International Nurses Day on 12 May and so here are some tax reliefs specifically available to nurses and how to claim them.
Professional membership fees and subscription
Employees who have incurred costs for professional fees can obtain a deduction from their earnings, provided the following two conditions are met:
- The fee incurred needs to relate to the duties of the employment carried on.
- The registration, certification, licensing or other reason for paying the fee is a condition that must be met before the employee may practise the profession relevant to performing the duties of the employment.
HMRC provides a list of fees which could be deducted from earnings.
Amounts paid by an employee on annual subscriptions can be deducted from their earnings, provided the following two conditions are met:
- Payment is made to an approved body of persons.
- The activities of the body are of direct benefit to, or concern the profession practised in, the performance of the duties of the employment.
The subscription to a body should be for either the advancement or sharing of knowledge, improvement of standards of conduct within the profession or provision of indemnity or protection to members of a profession against claims in respect of liabilities incurred by an employee in their role.
HMRC have also provided a list of approved professional organisations and learned societies, otherwise known as List 3, detailing organisations which would qualify for the deduction either as professional fees or subscriptions.Some examples include:
- Amalgamated School Nurses’ Association
- British Association of Critical Care Nurses
- Association of District Nurses
- Association of Nurse Consultants
- Association of Nurse Administrators f
- Scottish Association of Nurse Administrators
- Society of Nurse Advisors Child Health
- Association of Nurse Consultants
- National Association of Nursery Matrons
- National Association of Nursery Nurses
- National Association of Nurses for Contraception and Sexual Health
- Nursing and Midwifery Council
- British Association of Nursing for Cardiac Care
- Royal College of Nursing
Protective clothing or uniforms
A person is able to claim the amount spent on expenses for cleaning, repair and maintenance expenses of either tools or special clothing (which includes a nurse’s uniform). You can claim specific amounts, in which case you need to keep receipts to justify your claim, or you can claim a flat rate allowance.
The fixed sum deduction is only available on the basis that the employer has not made a reimbursed for such items.
Nurses, midwives, chiropodists, dental nurses, occupational, speech, physiotherapists and other therapists, healthcare assistants, phlebotomists and radiographers can claim £125 a year. In addition, each year, nurses can claim £12 for shoes and £6 for stockings or tights, which form part of their uniform.
How to claim relief
Allowable expenses incurred by the employee can be deducted from earnings before tax, resulting in less of the earnings being subject to income tax. If you contact HMRC the deductions will be given in your coding. Alternatively, tax relief for the expense can be obtained by entering the details within the self-assessment tax return,
Personal Protective Equipment – PPE
Many NHS staff have purchased their own ‘PPE’ equipment to keep themselves safe.
If NHS staff are not reimbursed for the PPE purchased, then the individuals will not be able to obtain tax relief for the expense. So, if you are one of these, make sure you claim your relief for fixed deductions on ‘tools or special clothing’.
International Nurses Day
12 May has been designated International Nurses day. It is the anniversary of Florence Nightingales birth. It’s a day to acknowledge and appreciate the hard work, commitment and bravery of nurses across the world.
HMRC fraud tip-offs
HMRC’s fraud hotline received more than 91,000 calls during the first nine months of the Covid-19 pandemic, with concerns that furlough fraud is likely to be behind many of the calls.
Apparently between April and December 2020, HMRC averaged around 10,000 calls per month, higher than the monthly average of 9,000 the year before.
It is believed that many of the calls could possibly be highlighting abuse of the government’s ‘Eat Out to Help Out’ scheme, with some restaurant’s being accused of faking excess orders to claim greater amounts from the government’s scheme.
Whilst those cheating the tax system should be held to account, heightened tax investigations are the last thing that decent, law-abiding businesses do not need at the moment. Months of lockdown restrictions have already put many businesses under huge pressure. HMRC investigations can be costly, time-consuming and can cause enormous stress for the owner-managers and directors involved.
HMRC will be looking to up the pressure on businesses in order to recoup as much tax revenue as possible in the coming months. It is therefore now more important than ever that businesses have cover in place to ensure they get the advice and support they need if an investigation is launched.
All of our clients already automatically have this insurance cover in place.
Earlier tax payments
HMRC is seeking views on bringing the payment of income tax and corporation tax closer to the point when the income arises. Any changes will be controversial but unlikely to be made within this parliament.
HMRC has launched a call for evidence on the impact of requiring payment of income and corporation tax more quickly.
Many of you, particularly those on lower incomes or tight cash flows may welcome paying tax more frequently to help with budgeting. This may also apply if you provide services only (personally with no employees) and those working in the gig economy or through an online platform.
The government has always denied that the quarterly update element of MTD for income tax and corporation tax is being introduced with a view to earlier payment. Many in the profession and other interested parties have voiced doubts about this.
If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at email@example.com.