Your tax affairs working through umbrella service companies
The most recent off-payroll working rules (IR35) reforms came into effect in 2017 (public sector) and 2021 (private sector).
Self-employed social workers need to be extra vigilant in ensuring their appropriate taxes owed to HMRC are paid.
If you work through umbrella service company, you still remain liable to pay your tax in full. Should the umbrella service company not, on your behalf, pay in full the tax you owe you will be contacted by the tax office or HM Revenue & Customs and asked to bring your tax affairs up to date, including paying any outstanding tax and National Insurance contributions.
We have been advised that a special section has been set up by HMRC to investigate various tax avoidance schemes provided by umbrella companies posing as an employer.
BASW is strongly advising members working through an umbrella to not wait to be contacted by HMRC and to take action now.
- Verify tax paid to date - If you’re being paid PAYE, you can access what income tax and National Insurance you have paid (within a week). Simply register log-in at www.gov.uk/personal-tax-account or download the HMRC app available for iOS and Android.
- Compare these figures with your P60 and payslips
- Should you discover part or all of your owed tax has not been paid
- Contact your umbrella and request the deducted tax be submitted to HMRC on your behalf
- Report immediately to HMRC
- Engage a tax professional to act on your behalf
- Create an email audit trail and take thorough notes
- Unless there is an error in calculation, tax owed will have to be paid so don’t neglect the situation
- Be informed
- Red flags to be aware of:
- Is part of your income being paid to you as more than just Basic Pay and Holiday Pay?
- Has your tax code changed?
- Have you been notified of TUPE?
- Has your umbrella service company gone into liquidation?
BASW is strongly advising members working through an umbrella to not wait to be contacted by HMRC and to take action now.AttributionBASW Independents
HMRC calculates Income Tax for the previous tax year between June and October. Therefore, we are anticipating several members to be contacted within the next couple of months.
- April 2021 changes to off-payroll working for clients
- HMRC Guidance: Umbrella companies offering to increase your take home pay [published 23 August 2018]
- Disclosure of tax avoidance schemes overview
- Disclosure of tax avoidance schemes (DOTAS) Guidance
- Find out more on abusive tax arrangements
- Meaning of tax arrangements
- Find out more on the HMRC drive to tackle tax avoidance