Tag Archives: 2010 Bribery Act

2010 Bribery Act
The 2010 Bribery Acts states that Recruitment Companies are not allowed to induce contractors to use certain Umbrella Companies. However, they do – and the suspicion is that they take bribes to do it.

[caption id="attachment_466" align="alignnone" width="214"] 2010 Bribery Act and Umbrella Companies[/caption]

Recruitment agencies are generally unscrupulous. It wouldn’t be any surprise that they went to any lengths to make money.

However, umbrella companies are on dodgy ground by inducing contractors to join particular umbrellas.
Preferred List of Umbrella Companies
Indeed many agencies have a list of umbrella companies that they allow their contractors to use, i.e. the ones that they get bungs from.

This is illegal under the 2010 Bribery Act. Contractors should be able to make their own choice.

However, many contractors don’t know any better, especially first time contractors.

They think that they have to use one of the umbrella companies that the agency tells them they have to join.

[caption id="attachment_467" align="alignnone" width="275"] Recruitment Agencies Inducing Contractors to Join Umbrella Companies[/caption]

Many of those contractors are not even caught by IR35 and don’t even have to use umbrella companies.

They could use personal service companies and be £10,000 to £15,000 a year better off.
Suing Recruitment Companies for Misleading Advice and Loss of Earnings
They could potentially sue those agencies for loss of earnings after their misleading advice.

Agencies would find this difficult to defend as they would have to acknowledge, in court, that they were getting payments from umbrella companies to induce contractors to join them.

This would throw up a massive scandal in the contracting industry where umbrella companies paying agencies to put contractors their way is rampant.
Contractors Suing Recruitment Agencies and Umbrella Companies
The agency would probably want to settle, out of court, with the contractor rather than risk that outcome.

If one contractor won a case like that, against a recruitment company, many contractors could then take cases out against their agencies and the recruitment companies would be advised by their lawyers to settle out of court.

The umbrella companies who paid the bungs could be liable too.

[caption id="attachment_462" align="alignnone" width="272"] Recruitment Agencies for Contractors[/caption]

85% – 90% Onshore Umbrella Company Alternatives

Posted on May 25, 2016 by admin

Onshore Umbrella Company Alternatives

It would be worth contractors looking at onshore umbrella company alternatives. These can give let them keep 85% to 90% of the money they earn.

Freelancers usually take the Personal Service Company or PAYE Umbrella Company route if they don’t go with offshore umbrella companies.

Therefore, if they want to stay onshore, there are a number of alternatives to those.

Indeed, there are a number of Umbrella Company Alternatives which are onshore rather than offshore.

They can be as attractive financially as offshore companies – and none of the money goes offshore.

So, they take advantage of tax incentives in the UK.

Limited Company Alternatives

Another alternative is to use a UK-based Tax Planning solution that allows you to continue to use your limited company.

Sometimes, agencies tell contractors that they have to use one of their recommended umbrella companies. They have a Preferred Supplier List.

There’s a good chance that the agencies are ‘getting a bung’ for doing this or getting some kind of ‘payment in kind’. This is actually illegal under the 2010 Bribery Act.

Agencies and Limited Companies

However, if contractors use one of the Umbrella Company Alternative solutions, which uses a limited company, agencies would not even be aware of it. The contractor would just tell them that they have their own limited company.

Agencies don’t insist that limited company contractors use umbrella companies.

So, here are examples of Umbrella Company Alternatives which use Limited Companies.

They make use of different tax incentives to cut the amount of tax that the contractor pays. All use the contractor’s limited company.

Example of Umbrella Company Alternative

Therefore, you should click on this to find out more information, or to apply, about umbrella company alternatives.

Compare the Umbrella Alternatives

One of these umbrella company alternatives should suit you. Also, they will save you lots of tax.

Furthermore, they use efficient tax planning to save contractors money while still using their limited companies.

Umbrella Companies Referral Fees to Agencies – Ask Them

Posted on December 25, 2015 by admin

Umbrella Companies Referral Fees

One thing of which contractors are often not aware, are umbrella companies referral fees to agencies to get them to put contractors their way.

Sometimes agencies tell contractors, especially new contractors, that they must join a particular umbrella company.

More often, they are told that they must join an umbrella company on the agency’s preferred supplier list (PSL).

Often, contractors just comply with that without question.

2010 Bribery Act and Umbrella Companies Referral Fees

Other times, agencies tell contractors that the umbrella company they want to use is not on the agency’s Preferred Supplier List. Therefore, agencies tell them, they cannot use them.

This may be contrary to the 2010 Bribery Act.

Umbrella Companies Referral Fees given to agencies for contractors

The agency cannot put undue pressure on a contractor to join a particular umbrella company, or set of umbrella companies.

Umbrella Company Contractors Options

So, what can a contractor do when the agency tells them that they must join a particular umbrella company or one on their Preferred Supplier List?

The first thing that they can do is that they can refuse to do so. They should tell their agency that they are going to use a different umbrella company.

They should do this in writing, e.g. via email.

Undue Pressure to Join Umbrella Company

This ramps up the pressure on the agency. Previously, they could have said that they were not using undue pressure to get a contractor to use a particular umbrella company. They were only recommending one.

However, if they refuse this reasonable, documented request from the contractor then they have upped the stakes.

It would be hard for them to argue, here, that they were only just recommending a particular umbrella company, or set of them.

Ask Agency About Umbrella Company Referral Fee

The second thing that a contractor should do, in response to a demand from the agency to join a particular umbrella company, is to ask the agency if they get an umbrella companies referral fee if a contractor joins up with an umbrella company recommended by them.

The contractor should, once again, put that information request in writing.

Umbrella Company News UK Contractors need

Umbrella Company News for UK contractors

The agency, may, or may not, respond in writing but the very request shows that the contractor has concerns.

Agencies are all very aware of the 2010 Bribery Act.

Refuse to join Their Recommended Umbrella Company

While they put the pressure on contractors to join particular umbrella companies, they also know where the line is. That is even if they sometimes cross it.

By asking these questions the contractor is weakening the agency’s resolve to insist that the contractor joins a particular umbrella company.

Once that resolve has been weakened, the contractor is then in a stronger position. He, or she, should write to the agency saying that he, or she, will not be joining the umbrella company recommended (or forced on them, to be frank), by the agency.

Using Undue Pressure to Join Umbrella Company

They should say that they feel that the agency had put undue pressure (using that very phrase) on them to join a particular umbrella company, or group of them.

The agency will understand the significance of that.

They can then inform them which umbrella company that they will be joining.

In the correspondence to the agency, the contractor should include at least one senior person on the CC list.

Include Finance Director

There’s always the possibility that the actual agent you are dealing with is chancing his, or her, arm in order to get extra commission.

They may not be as fully aware, as senior people in the company would be, of the consequences of breaking the 2010 Bribery Act.

The Finance Director would be a good one to CC in on your emails.

Recruitment Agencies Inducing Contractors to Join Umbrella Companies

They are ultra cautious, unlike salespeople. They understand better than anyone else at the company the full ramifications of breaking the 2010 Bribery Act.

They are also very powerful at a company, ranking only behind the Chief Executive and the Chairman. They rank ahead of an individual salesperson’s boss.

Contractor Should Stand Firm on Refusing Umbrella Company

The agency may bluster (as they do) but the contractor must stand firm when he, or she, wants to use an umbrella company not on the agency’s Umbrella Company Preferred Supplier List.

Although they would like to get the umbrella companies referral fees they don’t want to put their company in danger of breaking the 2010 Bribery Act. This would have very serious consequences for them.

Favourite Umbrella Companies for UK Contractors

Posted on December 23, 2015 by admin

Favourite Umbrella Companies

Many people have their favourite umbrella companies. That’s especially true for agencies who tend to only include those umbrella companies on their Preferred Supplier List who give them bungs for sending contractors their way.

The 2010 Bribery Act bans this but it happens.

However, that’s another story.

So, what constitutes a favourite umbrella company?

Dodgy Umbrella Companies

Firstly, one that doesn’t try to con you in the contract.

Make sure you read the contract and if you see any clause detailing any penalties for leaving the umbrella company, run a mile.

Umbrella Company Recommendations for UK Contractors

If they are being sneaky and duplicitous in the beginning that’s because they are, well, sneaky and duplicitous.

If you go with that umbrella company you really have started off on the wrong foot.

Umbrella Company Recommended by Agency

So, should you go with the umbrella company recommended by your agency?

You would if you were an idiot.

There’s almost certainly one reason, and only one reason, that your agency are recommending a particular umbrella company to you and that is that they expect to get a fee from the umbrella company for every contractor that they send them.

What about that then?

Too many contractors think of their agency as their agents, e.g. like the Mr. Ten Percents in the Acting and Football professions, who look after their clients’ interests.

Nothing could be further from the truth.

‘Your agent’ wants to extract as much money as he, or she, can from you. If they can possibly take half of the rate that is paid by the client for you then they would happily take it without any scruples.

Umbrella Company Preferred Supplier Lists

If your agency demand that you use a particular umbrella company, or an umbrella company on their Preferred Supplier List, you should refuse to do so.

If they tell you that you have to, ask them to put that in writing and see how they react.

It is illegal under the 2010 Bribery Act for agencies to induce contractors to join a particular umbrella company for a fee.

Don’t worry about standing up to them.

Umbrella Company Costs for UK contractors

They won’t dump you. The main fee you get for them is the margin they get on your weekly earnings.

The bung the umbrella company give them is just a bit extra on the side.

They are not going to reject the main course for a little dessert.

Your Favourite Umbrella Companies

Your favourite umbrella companies should pay you weekly and pay you on receipt of your timesheets.

Certainly run a mile from an umbrella company who say “we’ll pay you when we get paid” or make you wait for payment.

Many umbrella companies pay you straight away so use one of them.

Umbrella Company Fees

Before you join an umbrella company, examine the fees they charge and what you get for that.

Don’t necessarily go for the cheapest. Go for the best service at the best price. Look at what they are throwing in.

Umbrella Company Fees and charges for using them

See, if they throw in are any insurances like Professional Indemnity Insurance.

They can purchase these insurances in bulk so they can get them for you more cheaply than if you applied for the insurances yourself.

Tax Deductible Umbrella Company Expenses

One thing that is very important, if they are to be among your favourite umbrella companies, is to find out of they’ll help you to claim expenses as tax-deductible – and what expenses you can claim.

You can more than cover the cost of your umbrella company fees by setting expenses off against tax.

Umbrella Company contractors already pay an average of £10,000 a year more in tax and national insurance contributions than a personal service company contractor does.

Don’t make it even worse by not offsetting your expenses against tax.

Umbrella Company Contractors Who Don’t Claim Expenses

I was astonished to find that between 50% and 60% of umbrella company contractors don’t claim any expenses at all.

That would increase the tax differential between umbrella company contractors and personal service company contractors to perhaps £15,000.

Soon you’ll be talking real money.

Travel and Subsistence Expenses

From April 2016, umbrella company contractors are longer be able to offset travel and subsistence expenses against tax if they are Supervised, Controlled and Directed by their client when working for them.

It would be relatively easy for you to change your contract and working practices to make it so that you aren’t Supervised, Controlled and Directed by the client.

Umbrella Company Comparison for UK contractors

If the client previously gave you a piece of work, told you how long it should take and told you how to do it, supervised you doing it and where you should do it, negotiate a change in the contract and working practice here.

Supervision, Direction and Control

You are an experienced contractor.

Agree the piece of work to be delivered by the client and get the agreement signed off. Do the same with the estimate for the project. Agree that and get the agreement signed off. Agree where it is best done, at your home office or at the client’s site and document that agreement.

You surely don’t need to be supervised in doing the task. When the task is delivered ask your customer to give you a signed acceptance on what you have delivered to them.

If your umbrella company won’t give you advice on how to get these expenses offset against tax after April 2016 it may be because they don’t want you to be Unsupervised, Uncontrolled and Undirected.

They may not want not to change your contract to reflect your new way of working.

Outside IR35

Why, would they not want to do this?

One good reason, from their point of view, is that Supervision, Control and Direction is one of the three major planks of IR35.

The other two major planks are the Right of Supervision and Mutuality of Obligations, i.e. the obligation for them to pay you for turning up and for them to pay you whether there is work for you or not.

IR35 and UK Contractors - Inside or Otsideu

IR35 and UK Contractors and the tax they pay

If you are able to get outside the first plank of IR35, i.e. Supervision, Direction and Control, and you enter a Right of Substitution clause in your contract, then you are only a very short step away from being outside IR35 altogether – and not have to lose all that money each year by being in an umbrella company.

Maybe that’s why many umbrella companies are not too bothered about their contractors not claiming any expenses at all against tax.

Onshore or Offshore Umbrella Companies

Of course, the favourite umbrella companies for contractors could be either onshore ones or offshore umbrella companies.

The average IT Contractor earns £425 a day. That equates to around £100,000 a year once you take out time off.

An onshore PAYE umbrella company contractor would keep somewhere between £60,000 and £65,000 in tax and NI contributions.

Offshore Schemes for UK contractors to save tax

An offshore umbrella company contractor would keep somewhere between 85% and 90%, depending on circumstances, mostly on what they earn.

Umbrella Company Alternatives

So, the offshore umbrella company contractor could be keeping as much as £40,000 more than an onshore umbrella company contractor – particularly one who doesn’t claim any expenses.

Other alternatives to onshore umbrella companies include Tax Efficient Limited Companies for Contractors.

Both return £85% or more to contractors.

Offshore Umbrella Companies Viable Alternative to Limited Companies

Posted on November 30, 2015 by admin

Viable Alternative

HMRC and Chancellor Osborne have taken away travel and subsistence expenses, as a taxable deduction, from PAYE umbrella company contractors. So, are offshore umbrella companies a viable alternative?

There are over 200,000 umbrella company contractors in the UK.

They pay a monthly fee of over £100 to PAYE umbrella companies, basically just to pay them.

Caught by IR35 Tax

Those contractors in umbrella companies were normally those who:-

IR35 caught,
IR35 Maybe caught them and they didn’t want to take a chance or
they just wanted their admin done and get paid without any hassle.

There are others, still, who unscrupulous recruitment agencies shoehorned into joining umbrella companies. They just wanted the bung they would get for sending contractors their way by the umbrella companies.

Under the 2010 Bribery Act this is illegal. However, it is well know that this happens.

Umbrella Company Contractors alternatives

Personal Service Company Contractors

Those contractors who operate through personal service companies pay around £10,000 a year less in tax and NI contributions than PAYE umbrella company contractors on average.

This could rise to up to £15,000 now that umbrella company contractors will no longer be able to offset travel and subsistence expenses against tax, from April 2016.

Many contractors will just stay with their umbrella companies as that is all they know. Many of them were not even claiming expenses against tax anyway.

Others will stay because they reckon they IR35 catches them and have no alternative anyway.

Best Umbrella Company Alternatives

Others, who agencies shoehorned into them, or who do claim travel and subsistence expenses against tax in umbrella companies, will have a look around to see if there are any alternatives.

They may make another assessment to see if IR35 really catches them.

Even if IR35 does catch them,, they may seek advice as to how to take themselves out of it by changing their contracts and working practices.

After all, they could be up to £15,000 a year richer if they were not operating through an umbrella company but using a limited company.

Offshore Umbrella Companies as an Alternative

Some may go further and look at using offshore umbrella companies as an alternative.

They could save even more money as those offshore umbrella companies can let UK contractors keep perhaps from 85% to 90% of the money that they earn.

They could keep £25,000 to £30,000 a year more than they could keep by operating through an onshore umbrella company.

Offshore Umbrella Company List

This will tempt many contractors. After all this adds up over a number of years.

It can make offshore umbrella companies a viable alternative.

For a list of offshore umbrella companies click on Offshore Umbrella Companies for Contractors.

Umbrella Companies Contractors Alternatives After April

Posted on November 17, 2015 by admin

Umbrella Companies Contractors Alternatives

Are you looking for umbrella companies contractors alternatives?

Umbrella Companies in the UK are under a severe threat that would be a severe blow to the solar plexus. It would leave 200,000 umbrella companies wondering whether it would be worthwhile staying in an umbrella company or looking for another solution.

The Chancellor has already told us that he is going to abolish the ability of umbrella company contractors to offset travel and subsistence expenses against tax.

Umbrella Company Recommendations for UK Contractors

It is mainly contractors who fear that they are inside IR35 who join umbrella companies.

Disguised Contractors in Umbrella Companies

The umbrella companies disguise these contractors as employees of the umbrella company and they deduct PAYE from the contractors’ income.

In all other ways the contractor behaves like a contractor.

The umbrella company performs no other function other than to disguise contractors as employees for tax purposes and pay them accordingly.

They allow for tax deductions like travel and subsistence, pay the contractor and send the PAYE to the taxman.

If contractors were to just pay the IR35 tax they would not be able to claim much in the way of tax deductions.

Tax Deductible Travel and Subsistence Expenses

However, using the ruse, or device, of the umbrella company, they are able to claim certain things against tax.

These include travel and subsistence, equipment costs (e.g. their PC), pension contributions and membership fees of trade organisations.

However, the most important of these is the travel and subsistence that they can claim as deductible.

Conservatives Bashing Contractors Again

However, the Conservative Government, in the guise of Chancellor George Osborne, intends taking it away from them.

To be fair, they are also going to take it away from personal service company contractors too.

They couldn’t be fairer than that, could they?

Umbrella Company Contractors Monthly Fee

Umbrella Company contractors pay a fee of normally over £100 a month for their umbrella company, basically, to pay them.

They must be the only ‘permanent employees’ who their company charge just to pay their salaries.

It was worthwhile, previously, for contractors to pay that fee because they would get more back in tax-deductible allowances than their month fee.

Doing a financial bean count they still came out on top.

However, a financial bean count, after this, may well show that the money they are paying their umbrella company to pay them, and do their admin, is more than they are able to claim back in tax-deductible expenses.

They may as well just pay the full IR35 tax. It might be cheaper for them to do so.

Contractors Staying with Umbrella Companies

Some contractors will stay with the umbrella companies. They will be those who are happy to pay the umbrella company to do their admin for them even though they lose out financially.

There will also be those contractors shoved unceremoniously by their unscrupulous agencies into umbrella companies, against their interests, so that the agencies can continue to get ‘bungs’ from the umbrella companies for doing so.

Inducing contractors to join an umbrella company is illegal under the 2010 Bribery Act – but we know it happens.

However, many contractors will be looking for alternatives to umbrella companies.

Here are some umbrella companies contractors alternatives worth looking at.

Personal Service Companies (Limited Companies)

Although the Conservatives intend to take the travel and subsistence allowance from personal service companies too, there are still lots of other tax-deductible expenses that a limited company contractor can claim.

Indeed, it is reckoned that limited company contractors pay an average of £10,000 a year less in tax and NI contributions than an umbrella company contractor.

So, umbrella company contractors may seek to change their contracts, and working practices, to take themselves outside of IR35.

Many of those contractors using umbrella companies were those who weren’t sure if they were inside IR35 or outside IR35.

They didn’t want to take the chance of an IR35 investigation which may take years and cost them tens of thousands of pounds of back tax and fines if they lost.

However, with these changes to allowances that they can claim they may well be more willing to take a little bit more risk for more rewards.

Tax Efficient Limited Companies

These are similar structures to the common or garden limited companies.

However, they manage contractors income in the most tax-efficient way to give them returns of 85% or more.

Limited company contractors can continue to use their existing limited companies going this route.

An example of one of those, and how they do it, is here – Tax-Efficient Limited Companies.

Offshore Umbrella Companies

Multi-national companies and high net worth individuals, as well s hedge funds, have long used offshore companies to save on tax.

Now contractors are taking advantage of UK tax laws to do so too.

They can get keep 85% or more of their income using these.

For more information see Offshore Umbrella Companies List for UK Contractors.

The contracting world is now very different to the one that we are used to.

Those that plan in advance will be those who will not miss out.

To be forewarned is to be forearmed.

Agency Bungs – Major scandal of Umbrella Companies’ agency bungs

Posted on November 5, 2013 by admin

Agency Bungs

The news is of a major scandal of agency bungs to umbrella companies.

Under the 2010 Bribery Act, Umbrella Companies are not allowed to make payments to Agencies for sending contractors to them. However, we have had it confirmed that this does happen – and it is completely against the law.

Many agencies force contractors to go with a particular umbrella company or to one of several Umbrella Companies that are on their PSL. Often contractors will tell agencies that they want to use their own Umbrella Company and are told point-blank that this is not possible. They say that the contractor must use the one they recommend or one on their PSL.

The agencies are very forceful about this and will seldom back down when the contractor tries to put his or her foot down.

Of course, it may be that they just want to ensure that contractors are working through reputable Umbrella Companies. It could also be because they are getting a bung for each contractor the preferred Umbrella Company gets from them.

Major Scandal of Umbrella Companies

This is a major scandal of umbrella companies and many people know that it is happening. It is an open secret. At some stage the police may decide to raid an agency. One would presume that agencies hide these payments as much as possible. They are not likely to be on the accounts as ‘Agency Bribes’. They will hide them under some other name.

It is completely illegal to induce contractors to choose one Umbrella Company over another in order to get a payment. That payment is not legally a payment but a bribe.

If a contractor is told that they have to use an umbrella company ‘recommended’ by the agency or they cannot start the new contract, the contractor should ask the agency to email them something to say that they are not receiving any money from the particular umbrella company.

Alarm Bells Ringing

If this is not forthcoming then the contractor should have alarm bells going off all over the place. It would be up to the contractor to meekly accept what they are told or insist on having their own umbrella company. They could even threaten to call the police, or financial authorities, if the email saying that they do not receive money from the Umbrella Company is not forthcoming.

That should get their attention if the umbrella companies are taking agency bungs.

Of course, they may find some other candidate is suddenly better to take up the contract. However, they would know that you would call the police. You would have them over a barrel.

For a list of legal Offshore Umbrella Companies you should click on Offshore Umbrella Company List