Hello,
Here's a situation - last August an agency from UK called me and offered a new opportunity in a bank from Baltic states for 6 months period, starting from September. I am from Lithuania and client has a branch in Lithuania, so I could work on premises.
Everything looked nice, except that an agency demanded to either create a limited company or use umbrella company(further UC) services. Setting up a limited company in Lithuania is quite bureaucratic and would take 20-40 percent from profit, so it was not an option at all.
But in Lithuania we have two more business types, which takes a lot less for taxes and are dedicated especially for a small businesses. For example there's an individual activity under a business certificate, which would take up to 20 percent as taxes (even a lot less when it's a first year of a business). An agency didn't want me to use it and couldn't explain why. So I was basically forced to use their suggested UC.
UC told us, that we (there a four of us, hired as a contractors at the same time) are under " an employed solution", all taxes will be paid and will take up to 20 percent of profit and all communications with tax authorities will be handled by them.
It was a first time for us all dealing business with and umbrella type company, everything looked good enough, as we didn't really knew where to check for red flags. But here passes a first month and suddenly Lithuanian Social Insurance (LSI) fund is calling and asking where's the monthly national insurance contribution.
So we did a call with an agency and UC, and UC were surprised that there's some monthly based tax required. They asked for a proof that this communication actually happened, but never came back to this question and just ignored it. We had to pay national insurance contributions by ourselves, otherwise we would be in trouble if not paying and suddenly a visit to public hospital would be needed. First red flag.
After this incident we started asking a lot of questions, for example how are we actually employed, are we employed by UC in UK, so taxes will be paid there. In that case do we need to fill an A1 form, so double taxation wouldn't happen from Lithuania State Tax Inspectorate(STI). UC said, just fill the forms and everything be all right, but no proper explanation how actually they will pay taxes and what's actually our employment status. Second red flag.
Then we started to ask for the payslips from UC as we have never actually received any. After a few weeks of ignoring us, they managed to make one and sent it to me. There were a couple more times when we asked for payslips, but they managed to provide them for me twice, other contractors never received them, though UC wrote, that payslips will be issued "in a few minutes" for everyone.
At that time we clarified with STI, that taxes has to be paid in the country of residence, hence in Lithuania. After checking payslip I've finally understood, that this company has no clue what they're doing. Roughly there are three tax types(mandatory NIC, state NIC, income tax), which has to be paid in Lithuania, both NICs are constant percentage and in payslip they were not even close to what they have to be. Third red flag.
Almost at the same time, we found, that our agency is actually capable of doing business with persons under personal business license, so we started transition from umbrella company. It took 1,5 months, so we got rid of UC only at the end of February. Payroll never took longer than two weeks after submitting hours for finished month, but that was the only positive thing.
So until January (5 months in total) UC was responsible for doing payroll and keeping deducted money for taxes. Later we've started to demand, that they would return all deducted money including service fee because of terrible service, so we could declare and pay taxes for 2019 by ourselves, but UC didn't want to do that as they were telling that paid taxes already and it's us who are hiding something and want to do some shady things. Fourth red flag.
Then we got official declarations from STI and LSI, that no transfers were received except monthly NICs which we were paying by ourselves. After this argument UC came with "resolution", they will actually return deducted money for taxes, but no service fee and they will not carry any responsibility for paying taxes.
A couple weeks back we finally received a transaction of deducted taxes, but it was only a part for 2019, for January it was missing. We've asked what does this mean right away, but they have never answered and just yesterday our agency forwarded a message, that UC will transfer part of January only then, when we will declare and pay taxes and when we will provide declarations for them.
Is this even legal? That declaration would contain too much sensitive information which I don't want to provide.
In contract they have have clearly broke a part where UC was obliged to pay a NIC and they never did't that.
I've read in this forum that a normal charge by umbrella company is up to 100 GBP. This UC is charging 377 euros service fee per month.
Help, anyone?
At this point all I'v found, that I would have to contact Employment Agency Standards Inspectorate. Is there someone else who could help us in such situation?
Here's a situation - last August an agency from UK called me and offered a new opportunity in a bank from Baltic states for 6 months period, starting from September. I am from Lithuania and client has a branch in Lithuania, so I could work on premises.
Everything looked nice, except that an agency demanded to either create a limited company or use umbrella company(further UC) services. Setting up a limited company in Lithuania is quite bureaucratic and would take 20-40 percent from profit, so it was not an option at all.
But in Lithuania we have two more business types, which takes a lot less for taxes and are dedicated especially for a small businesses. For example there's an individual activity under a business certificate, which would take up to 20 percent as taxes (even a lot less when it's a first year of a business). An agency didn't want me to use it and couldn't explain why. So I was basically forced to use their suggested UC.
UC told us, that we (there a four of us, hired as a contractors at the same time) are under " an employed solution", all taxes will be paid and will take up to 20 percent of profit and all communications with tax authorities will be handled by them.
It was a first time for us all dealing business with and umbrella type company, everything looked good enough, as we didn't really knew where to check for red flags. But here passes a first month and suddenly Lithuanian Social Insurance (LSI) fund is calling and asking where's the monthly national insurance contribution.
So we did a call with an agency and UC, and UC were surprised that there's some monthly based tax required. They asked for a proof that this communication actually happened, but never came back to this question and just ignored it. We had to pay national insurance contributions by ourselves, otherwise we would be in trouble if not paying and suddenly a visit to public hospital would be needed. First red flag.
After this incident we started asking a lot of questions, for example how are we actually employed, are we employed by UC in UK, so taxes will be paid there. In that case do we need to fill an A1 form, so double taxation wouldn't happen from Lithuania State Tax Inspectorate(STI). UC said, just fill the forms and everything be all right, but no proper explanation how actually they will pay taxes and what's actually our employment status. Second red flag.
Then we started to ask for the payslips from UC as we have never actually received any. After a few weeks of ignoring us, they managed to make one and sent it to me. There were a couple more times when we asked for payslips, but they managed to provide them for me twice, other contractors never received them, though UC wrote, that payslips will be issued "in a few minutes" for everyone.
At that time we clarified with STI, that taxes has to be paid in the country of residence, hence in Lithuania. After checking payslip I've finally understood, that this company has no clue what they're doing. Roughly there are three tax types(mandatory NIC, state NIC, income tax), which has to be paid in Lithuania, both NICs are constant percentage and in payslip they were not even close to what they have to be. Third red flag.
Almost at the same time, we found, that our agency is actually capable of doing business with persons under personal business license, so we started transition from umbrella company. It took 1,5 months, so we got rid of UC only at the end of February. Payroll never took longer than two weeks after submitting hours for finished month, but that was the only positive thing.
So until January (5 months in total) UC was responsible for doing payroll and keeping deducted money for taxes. Later we've started to demand, that they would return all deducted money including service fee because of terrible service, so we could declare and pay taxes for 2019 by ourselves, but UC didn't want to do that as they were telling that paid taxes already and it's us who are hiding something and want to do some shady things. Fourth red flag.
Then we got official declarations from STI and LSI, that no transfers were received except monthly NICs which we were paying by ourselves. After this argument UC came with "resolution", they will actually return deducted money for taxes, but no service fee and they will not carry any responsibility for paying taxes.
A couple weeks back we finally received a transaction of deducted taxes, but it was only a part for 2019, for January it was missing. We've asked what does this mean right away, but they have never answered and just yesterday our agency forwarded a message, that UC will transfer part of January only then, when we will declare and pay taxes and when we will provide declarations for them.
Is this even legal? That declaration would contain too much sensitive information which I don't want to provide.
In contract they have have clearly broke a part where UC was obliged to pay a NIC and they never did't that.
I've read in this forum that a normal charge by umbrella company is up to 100 GBP. This UC is charging 377 euros service fee per month.
Help, anyone?
At this point all I'v found, that I would have to contact Employment Agency Standards Inspectorate. Is there someone else who could help us in such situation?
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