IR35 changes: Umbrella industry amendments proposed to avoid ‘disastrous’ tax consequences | Personal Finance | Finance

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Dave continued by reflecting on the importance of these changes: “These amendments give the Government a year to either ‘curb or kill’ the unregulated umbrella market. In an unregulated industry, non-compliance in the umbrella sector is reportedly rife and ranges from difficult to spot aggressive tax avoidance schemes to self-proclaimed ‘compliant’ firms who skim monies from contractors’ wages by leveraging a lack of transparency and ignorance on the part of the worker. Moreover, it is estimated that around £4.5bn a year is lost through unpaid taxes and monies withheld from the Treasury and contractors.

“The worse the level of malpractice, the greater the rewards for the mischief, and the greater the kickbacks for agencies, all helping to promote a self-fulfilling downward spiral, funded by pickpocketing both the Treasury and hard-working people’s pay packets, without their knowledge.

“There are umbrella companies that run a vanilla compliant operation, with no reward schemes for agencies, and which treat workers fairly with reasonable charges, but they find it harder to access the market, because they lack the financial firepower to purchase space on an agencies Preferred Suppliers List – for which six-figure sums can be exchanged.

“Often, where the contractor does spot malpractice and complains, the umbrella first attempts to dismiss the claim. If the worker seeks justice via legal means, then the umbrella agrees to a ‘negotiated settlement’ (a COT3 agreement) which includes a gagging clause – which is essentially blackmailing the worker with their own money to stay silent and not reveal their bad practice.

“The malpractice needs to stop and we would urge MPs to vote on the chosen amendment so that the sector moves towards one where the cowboys are driven out, allowing the compliant parts of the sector to get on with their jobs to support the contracting sector.

“Any amendment will be voted on at the Report Stage on May 24 2021 and could solve many of the issues and help to avoid a repeat of a disastrous Loan Charge type tax that may be required if action is not taken now.”





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