In the run up to our technology event this Thursday, 26th September (you can book your complimentary tickets to the morning and afternoon sessions now) we are hosting blog posts from some of our exhibitors. This one is provided by SmartWork.
Umbrella companies are relatively unregulated and the barriers for entry are low. From a tax perspective, HM Revenue & Customs (HMRC) has highlighted concerns over the degree of non-compliance with tax legislation by ‘umbrellas’. Indeed, their successful claim against Reed Employment for operating a non-compliant travel and subsistence scheme highlights HMRC’s appetite for taking legal action if necessary in order to recover under-payments of tax.
“If you are an agency contracting with umbrellas, it is now more important than ever to have a robust Preferred Suppliers List (PSL) in place to protect yourselves from any business risk.” Says Steven English, Business and Operations Manager for SmartWork.com Ltd.
“When choosing a PSL it is also important to recognise that in doing so, you are recommending these organisations to your respectable clients, so choosing only compliant, reputable and knowledgeable umbrella providers is a must.”
So, what criteria should you consider? As a guide, here are SmartWork’s top tips for selecting umbrella companies to work with. By following and researching the points below, you can be confident that you will be protected from any risks associated with supplying flexible workers.
Compliance
Research the company at hand and ensure they are compliant with all relevant government legislation e.g. MSC, AWR, RTI etc. You are also well within your rights to request to see a copy of their certificate of incorporation, VAT certificate and insurance certificate to ensure the company is legitimate.
Always be aware, and look in to, claims of take-home earnings and expense procedures as these can often be misleading. Also check that they follow HM Revenue and Customs (HMRC) guidelines correctly.
Know Who You Are Doing Business With
It’s relatively easy to set up an umbrella without a significant capital outlay or without proper professional advice. We would always recommend that you know who you are doing business with, who the owners and directors are and what experience and qualifications they have.
Financial Stability
Does the provider receive regular auditing by a respectable body? If so, they would be very open about this information, so always ask to see details.
We support the Freelancer & Contractor Services Association’s (FCSA’s) recommendation that net assets should be maintained at a level in excess of 2.5% of gross profit. We would also advise taking into consideration any contingent liabilities that may be disclosed in the accounts.
Overarching Contract of Employment
Check that the company has a strong contract of employment in place where the contractor is a legal employee of the umbrella. When this is securely in place you, and the end client, will hold no liability if the contractor’s rights are infringed and all tax liabilities are covered.
The Service
When recommending umbrella companies to your contractors, it is important to be confident that they have a fantastic reputation within the industry. Do your research and check public comparison websites and forums where contractors and recruitment agencies are able to leave reviews themselves.
We would also recommend requesting your own personal point of contact at the umbrella company to manage your account.
Accreditations
Are they a member of a trusted professional organisation such as The Association of Professional Staffing Companies (APSCo)?
APSCo provides a recognised stamp of quality and assurance when choosing its members, and with this you can expect only the very best quality of service, knowledge and compliance. If the umbrella company is not a member of a well-established organisation, this may be something to be wary of.
Aggressive Business Models
There are some business models operated in the market place, including those involving offshore structures, which seem almost too good to be true. Agencies should be aware that some of these schemes may not be compliant and could be subject to a challenge from the HMRC.
If you are in any doubt over the legality or tax effectiveness of any business model proposed by an intermediary, we would always advise that you seek professional advice.
If you would like any further information or discuss forming your own PSL, please do not hesitate to contact the team at SmartWork on Enquiries@SmartWork.com or, alternatively, call the business team on 0800 434 6446.
You can also visit SmartWork’s website on: www.SmartWork.com
