As the Operations Manager for a contract management company, also known as an Umbrella Company, I must admit to feeling a little nervous about the budget. Recent talk of closing down loopholes in tax avoidance schemes has got the government looking at headline grabbers, then to hear on Radio 4 on Sunday that the bastion of truth and impartiality that is the BBC, want to lump Umbrella Companies in with not only tax avoidance schemes, but also the exploitation of low paid workers.
In all fairness, Fran Abrams used the term “Payroll Company” as many lower standard Umbrella Companies market themselves as such. She pointed out that many of these companies (she had 3 examples) are still using travel related expenses to offset against the minimum wage, a practice made unlawful in January 2011 after much moral argument and reported here with the judgement of the judicial review launched by Cordant Group.
Here’s why contract management companies are neither tax avoidance scheme’s nor exploitative if they are properly structured. Since January 2011 all companies have had to pay employees at least the minimum wage for every hour they have worked so decent law abiding Umbrella Companies and Contract Management Companies will no longer offer services at anything below the rate of around £8 per hour to cover employers NI and holiday pay, this rate leaves little in the way of expenses to be claimed so the privilege of supplying your services to a number of clients through a series of short term assignments has been restricted to the skilled and semi-skilled.
If you have to travel to a temporary workplace then the cost of this travel can be claimed tax free, that is just a matter of tax law, it’s nothing to do with tax avoidance, provided the expenses are genuinely incurred and subject to an acceptable level of audit.
So I await tomorrow’s budget, wondering what the future holds for the flexible workforce of the UK and for the economy in general.