John Whelan FCA’s Post

#Budget24 - Umbrella Companies From April 2026, the government will introduce legislation to make agencies that use umbrella companies to employ workers responsible for ensuring that the correct income tax and National Insurance contributions (NICs) are deducted and paid to HMRC. This will mean that the agency that supplies the worker to the end client will be legally responsible for operating PAYE on the worker’s pay and will be liable for any shortfall, whether they operated their payroll themselves or used the umbrella company to run payroll for them. HMRC data claims that £500 million was lost to disguised remuneration tax avoidance schemes in 2022 to 2023, almost all of which was facilitated by umbrella companies. Neil Carberry, Recruitment & Employment Confederation Chief Executive comments “The Chancellor is right to tackle issues around umbrella company compliance – but has chosen the wrong tool. Employment businesses are already some of the more heavily regulated businesses in the country, and responsibility for supply chain compliance will stretch them. Yet umbrella companies themselves are not regulated. This is long overdue and would deliver a much more level playing field.” #contracting  #umbrellas #recruitment

A report by the Public Accounts Committee (PAC) has echoed warnings that IR35 rules are too complex and may be driving some businesses overseas. The off-payroll working rules were introduced to indicate whether contractors were deemed to be self employed, and therefore responsible for their own tax affairs (‘outside’ IR35), or taxed as if they were employees, with income tax and national insurance contributions deducted (‘inside’ IR35). In 2017, responsibility for deducing tax status was shifted to the employing organisation instead of the individual contractor for public and third sector companies, followed by private sector companies in 2021. The PAC report said: “Since the IR35 reforms, employers have moved between 150,000 and 200,000 workers from contractor status on to their own payroll. “However, we are concerned that a lack of confidence in how to apply the rules, together with HMRC’s tough approach when taxpayers make mistakes, is unnecessarily deterring companies from using contractors.” The MPs added that they were “concerned” that HMRC’s approach to serious abuse was not deterring criminal activity, “while at the same time its approach to tackling IR35 is deterring legitimate economic activity”. The committee of MPs asked HMRC whether its pursuit of IR35 cases through the courts was “fair and proportionate”, but HMRC said “some litigation is inevitable”. HMRC said it will always try to resolve disputes by agreement and insisted that IR35 litigation was rare, with only 22 cases heard at the first-tier tribunal since 2017. It conceded it may need to update its guidance and tools on the basis of the courts’ judgments. However, “HMRC did not accept that its guidance was not clear”, the report said. Meg Hillier, Labour MP and chair of the committee, said: “Our report poses serious questions as to whether HMRC is getting the balance right between its civil and criminal prosecutions. “Our committee has heard the frustration felt by the many taxpayers and organisations that provided evidence to our inquiry loud and clear. HMRC would be well advised to do the same.” Rebecca Seeley Harris, off-payroll and IR35 expert from the Fair Umbrella campaign, told People Management: “Thank goodness for the PAC report for highlighting the complete inadequacies of the current off-payroll legislation. “It is impossible to work with and only encourages businesses to put contractors on payroll unnecessarily. Many of the contractors are being forced to use umbrella companies, which are currently an unregulated sector. “The current economic environment is hard enough without adding the additional burden of an overcomplicated system that requires businesses to have an in-depth knowledge of case law to interpret.” [People Management] #ir35 #taxation #contractors #offpayroll

As this list grows it is key to make sure the Umbrella companies you are contracting with have the resources to operate compliant payroll solutions for your contractors. https://lnkd.in/eZTs4Bbk

Interested in the latest HCM and payroll regulatory and compliance updates from ADP? Please see our most current Eye on Washington: #IRS Releases Revised Draft Form 6765; Also Modifies Refund Claim Disclosures https://bit.ly/EoW062824  #adp #payrollcompliance #HCMcompliance

The Public Accounts Committee (PAC) published its report today including some scathing comments by the MPs on IR35 and Off-Payroll Working (OPW). HMRC reported that some 150,000 - 200,000 people have been moved from their PSCs to payroll by the engagers under OPW private sector and a further 50,000 in the public sector. Thanks to People Management magazine and Juliette Rowsell for highlighting this and for including my comments. The PAC committee also enquired whether HMRC's pursuit of some IR35 cases through the courts was fair and proportionate. HMRC said it will always try to resolve disputes by agreement but that some litigation is inevitable. To get this into perspective, IR35 cases are rare, these cases pre-date the new OPW where the engager will be liable. There have only been 22 cases at the FTT since 2017. Of those, 11 were appealed by either HMRC or the customer. Two of those cases went on to the Court of Appeal. Of the appealed cases, the higher court found in HMRC's favour in 6 hearings, the customer in 1 and the rest are pending. #IR35 #Contractors

From April 2026, the government will mandate the reporting and paying of Income Tax and Class 1A National Insurance Contributions on benefits in kind via payroll software. This represents a significant change to the current system and should reduce the administrative requirements and simplify the tax system for both employers and employees. #EmploymentBenefits #P11Ds

Senator Gallagher is indeed on a crusade against labour-hire companies and consultancies. The Department of Finance has introduced a controversial proposal: a 3% disincentive tax levied on Federal Government agencies utilising external labour firms, framed as a strategy to save taxpayer money by expanding the size of the APS. Check out the story here: https://lnkd.in/gds7_p8R This move seems to stem from the Albanese government’s deep-rooted aversion to small businesses, businesses in general, and individuals outside the Modern Award system rather than from evidence-based policymaking. The primary success metric in this approach appears to be reducing the government’s dependency on external labour. Productivity, what is that? The market outlook is becoming more challenging for SMEs in the professional services consulting sector. If you're reading this and own a consulting company, despite your investments in building your business and developing your team’s capabilities, the government’s focus on converting contractors to APS positions suggests an impending challenge to retain your workforce, let alone grow it.

The ATO is continuing to monitor compliance, this time turning its attention on employers and their employee obligations. They are ramping up their audits on employee obligations including PAYG Withholding, superannuation (both the correct amounts and that they are being paid on time), and FBT. Check out the article if you would like to know more.

I want my compensation to be reclassified as tips. In case you might wonder about the risk that my employer could shaft me… my exposure is limited to only 1 pay period (2 weeks) anyway. How come? Employment contracts for at will employees expire and automatically renew on a daily (or even hourly?) basis until terminated in writing by 1 party. I can further limit my exposure by having my employer confirm my tip amount on a daily (or even hourly?) basis. Actual payout can remain biweekly. The benefit to me for such an arrangement is obvious. The benefit to my employer would be the elimination of his contribution to social security and other taxes. Win-win.

Closing out our series on the "Do's & Don'ts" of onboarding your H-2A workers, today's focus is Social Security, taxes, and deductions. Sound stressful? Don’t worry, check out our article for expert guidance! To access our full H-2A onboarding series, visit our blog at www.maslabor.com/news #H2A #Onboarding #SocialSecurity #Taxes #Deductions #H2AArrival