HMRC announces review of umbrella companies
3 December 2014
Mark Groom, tax partner at Deloitte, comments on the government’s proposal to review the use of overarching contracts by umbrella companies.
“In addition to the removal of tax relief for business expenses claimed in conjunction with salary sacrifice arrangements, the government wants to review ‘overarching contracts’ used by umbrella companies. For some this seems like overkill, but may be necessary where umbrella company contracts are structured so as to avoid a salary sacrifice.
“There may also be broader concerns that individuals engaged by umbrella companies are not really ‘employees’ in the traditional sense of the word, given that umbrellas do not normally provide workers under these contracts with any work. This could have implications for employment businesses and end clients higher up the chain providing temporary workers.
“Umbrella companies can be convenient for temporary workers who receive one pay check from one employer, whoever they work for. However, they are often charged for this privilege. The tax advantage delivered through tax free expenses can more than compensate for this charge, so they end up better off. But without this additional benefit, umbrellas may need to re-think their business models to ensure they don’t lose workers.
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Notes to editors
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.
The information contained in this press release is correct at the time of going to press.
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