'Uncertainty' for umbrella companies in coming months

Posted on 28 November 2008

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Her Majesty's Revenue and Customs (HMRC) is likely to look more closely at the role and practices for umbrella companies in the coming months, it has been claimed.

Writing for Shout 99, freelancer expert Bob Jones warned that a thorough investigation of employment contracts, record keeping, scale charges and dispensations could be expected after such firms emerged largely unscathed from the chancellor's pre-budget report.

He commented: "What I can report as fact is that if there is no valid overarching contract HMRC will instruct that all expense payments are made under deduction of tax – whether that is backdated will depend upon circumstances."

"In addition they will look closely at the dispensation that is in force, how the umbrella is operating within the terms of that dispensation including, in particular, the record keeping," he added.

Mr Jones said that umbrella companies may wish to conduct reviews of contracts and dispensations, in preparation for any possible action from the Treasury.

The government has chosen not to legislate on the controversial subject of income switching within family businesses at present.

Category: Tax & Legislation News

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