The great umbrella company scam

GB350

I'm a carpenter in the construction industry and have been for nearly 30 years now. For most of that time it has been nigh on impossible to get direct employment on a paye basis as the industry mainly likes to hire and fire when it suits them. This has led to the multitude of agencies now in existence who act as overpaid middle men in order to find you work. Add to this the parasitic payroll companies which have become an industry in their own right in order to dodge the taxation liabilities of the agencies and you find the position we are in now. I currently pay my agency over £2.00 an hour for every hour I work just for placing me in a position which could and should have been advertised directly in a place where I could have applied for it. Then I pay an additional £15.00per week to their designated payroll company just so I can get paid. Basically meaning I am paying 2 separate entities over £100.00 every week that should be going into my pocket and the government's through the additional tax I would be paying on it.
Today I've been informed by the agency I'm currently working through that they can no longer pay me via the CIS scheme owing to the legislation brought in by the government last February. This legislation is designed to bring an end to false self employment and effectively put the agencies and payroll companies out of business. This is a good thing as far as I'm concerned.
This brings me to the crux of the problem at present which is that the only route left to the agencies and payroll companies is to insist on all their employees being paid through the payroll company's umbrella company option which is effectively PAYE but with the slight catch of them expecting you to pay their employers NI contributions as well as your own and trying to bulk up your take home pay to existing levels by getting you to claim spurious expenses, incorporating your holiday pay into your weekly wage and sending them piles of receipts for this, that and everything. Net result of this being that you would no longer be able to claim a tax rebate at the end of the year which to me is worth about £2,500.00 . This makes me personally around £50.00 a week out of pocket instantly.
The agencies and payroll companies are now running around in ever decreasing circles trying to preserve their own profit margins but at the expense of the actual workers . The big players in the construction industry are highly unlikely to up the rates they are paying to the agencies as they are currently on projects which were priced last year.
Are the government likely to relax some of the employment laws in order to help the transition to the direct employment model they obviously so desperately want and what are us poor sods caught in the middle of this supposed to do in the meantime..

AbbieCadabra

i was absolutely astounded when i 1st heard of these set ups & you having to pay employers NI, still don't really understand how this loophole exists.

would it be worth contacting your local councillor/MP to raise the issue? get everyone you know in the same boat to do the same, the more voices shouting, the more likely you are to be heard. no doubt it will still take X years for any change to be made...

good luck, let us know if you get anywhere

brightonman123

I went for an office temp job, and agency was pushing this, via a 'third party' umbrealla co.. seemed too complicated, and unneccesary, with very little (if any) saving for me..


Having to pay the 'employers' NI was a step too far.. PAYE or nae!

McKneff

:rotfl::rotfl::rotfl::rotfl:


I thought someone had been trying to sell you a dodgy brolly :rotfl:

GB350

A quick update...
It seems the main contractor I'm currently working for is now colluding with the agencies and specifying that the labour they are sourcing from them is to be paid via the paye umbrella method. This would suggest to me that they have decided to fight the agencies corner as it is obviously more convenient for them to source their labour this way. The main contractors are not liable to any comeback from HMRC so I cannot see any other reason for them to take this position.
There is a caveat to this though, being that this stipulation is only applicable to blue collar workers. It would seem that all of the labourers, handymen, and gatekeepers etc have already been switched to this payment method, albeit with a small hourly increase.
They have been shafted financially, they just have'nt realised it yet.
If you are classed as a white collar worker then payment via CIS self employed is still ok. It's been suggested to me that if they changed my job description title from carpenter to Finishing foreman then that would be good enough to get around this new ruling and continue to pay me via CIS. They will be sorting this out on Monday I've been told and I'll be happy if they can but have a feeling that the proverbial tin is just being kicked down the road a bit here.
Would love an opinion from anybody else caught up in this stand off between the construction industry and HMRC.

PasturesNew

When contracting in the IT industry it's always been the norm that you either set up a Ltd company, or use an umbrella to receive your pay.

patman99

It always amazes me why the construction industry needs to have schemes like CIS.

makes me glad the majority of my building jobs have either been via an agency who pay me a fixed hourly rate without the need for an umbrella company, or with small local builders who paid me as PAYE and couldn't give a stuff as to whether or not I even had a CSCS card.

ohreally

Perhaps an organising opportunity for the unions here?

keyser666

Setup a Ltd company

GB350

Well it would now seem that there is no way of avoiding being forcibly bumped onto an umbrella company payment scheme.
Thanks to the previous respondent for the limited company suggestion but my turnover is generally around the 25k mark and the costs involved in setting up and running a PSC are too much to make this a worthwhile option. The payroll company's umbrella scheme says travel and subsistence expense claims will significantly reduce my tax liabilities. This is complete tosh. HMRC have stated already that these expenses can only be claimed back at the end of the tax year and not used on a weekly basis to enhance your wage. So at this point in time I'm now expected to pay 4....yes 4 lots of NI.... classes 1, 2 & 4, and also my employers NI. I'm struggling to understand why HMRC have decided to leave this Umbrella company loophole open as it should be obvious to any idiot that the people who are going to be shafted by it are those at the sharp end, supplying the services.

AbbieCadabra

What costs are you referring to regards setting up as Ltd? We pay around £600 per yr for an online accountancy service, i doubt you'd have to pay more than this. Are there other costs involved in your case? I don't know what PSC is.

For your t/o you probably wouldn't be recommended to set up as Ltd, but these aren't normal circumstances.