Letter from HMRC about umbrella company used in the past

[webberg]

Assuming weekly based on the hourly earnings (minimum wage is £8.70 so it can't be for longer than a week).

That doesn't look right to me. - NIC is right but the PAYE Tax doesn't - it's about £100 too low but that depends on tax code.

Gross pay is £1,506.

PA - assuming not used elsewhere - is £12,500 a year or around £240 a week.

Taxable pay therefore £1,266.

Basic Rate Tax is £253.60.

Not a million miles away?

[eek]

Gross pay is £1,506.

PA - assuming not used elsewhere - is £12,500 a year or around £240 a week.

Taxable pay therefore £1,266.

Basic Rate Tax is £253.60.

Not a million miles away?

£1506 per week gives me a annual gross wage of £69,000 or so (as holiday pay is included so I will assume 4 weeks holiday and 8 bank holidays) - which is well over the basic rate - we are looking at £19,000 which should be being taxed at 40% not 20%.

Now we have seen umbrellas in the past using emergency tax at 20% for a long period of time to pay an employee which may well be the case here and that didn't end up well (the person was presented with a £20k bill to pay) which is why I said the tax doesn't seem right - on my redone calculation it's £50 out rather than £100 though.

[webberg]

£1506 per week gives me a annual gross wage of £69,000 or so (as holiday pay is included so I will assume 4 weeks holiday and 8 bank holidays) - which is well over the basic rate - we are looking at £19,000 which should be being taxed at 40% not 20%.

Now we have seen umbrellas in the past using emergency tax at 20% for a long period of time to pay an employee which may well be the case here and that didn't end up well (the person was presented with a £20k bill to pay) which is why I said the tax really should be £300 or so (yes my £360 was high I forgot about the holiday bit but it's still quite enough).

Yep - agreed.

So the tax deduction is between £60 and £100 a week less than it might be.

That might be accounted for by expenses - but very doubtful.

There is no tax code via PAYE that gives a personal allowance and then taxes everything else at basic rate.

Something quite odd here.

[eek]

Yep - agreed.

So the tax deduction is between £60 and £100 a week less than it might be.

That might be accounted for by expenses - but very doubtful.

There is no tax code via PAYE that gives a personal allowance and then taxes everything else at basic rate.

Something quite odd here.

Welcome to the dodgier side of the umbrella industry - and these aren't anywhere near the worst I've seen.

[webberg]

I've previously written here about some of the bigger umbrellas to whom we sent the same data and received different "net" answers.

The creative use of expenses and application of "emergency" codes was prevalent.

Not a mention that a tax return submission would see more tax due.

Perhaps the most worrying was the NIC treatment.

There are some difficulties in working out the correct amount of employee and employer NIC where a job does not last a whole tax year. In particular giving effect to what is essentially the "nil NIC" value can be tricky.

At least three of the umbrellas we tested solved that problem by ignoring the NIC free part and applying the rates the everything.

I don't know if their subsequent returns to HMRC included the NIC free allowance (allowing them to pocket some of the NIC) or whether all the NIC was paid over.

I do know that individuals were not advised that they should check their NIC position post year end and make a claim for a refund.

[Taxissues]

Assuming weekly based on the hourly earnings (minimum wage is £8.70 so it can't be for longer than a week).

That doesn't look right to me. - NIC is right but the PAYE Tax doesn't - it's about £100 too low but that depends on tax code.

It’s for the week, the hours she’s worked, tax code is 1264L

[Taxissues]

It’s for the week, the hours she’s worked, tax code is 1264L

Actually, the pay has 2 time sheets covering 57 hours over 2 weeks, I think.

[NotAllThere]

While the high earners - well yes, it's crap. But the low earners getting shafted by these total tossers. I have to say I get very ticked off about that.



So I propose the following tax law. Bring back the death penalty for people who promote schemes that exploit tax loopholes. Even amnesty would agree with that.

[eek]

Actually, the pay has 2 time sheets covering 57 hours over 2 weeks, I think.

In which case - that looks 100% right - the devil when it comes to umbrella calculations is very much in the detail.

[Taxissues]

In which case - that looks 100% right - the devil when it comes to umbrella calculations is very much in the detail.

Ok, thanks