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Tax Evasion & Avoidance – It’s a 4 pronged approach

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It has been a week since the Chancellor proposed a rise in income tax to 50 per cent for the highest earners and the worry for some contractor and freelance workers now is that the Revenue has issued the statement that it would spend a quarter of its total £4 billion budget on catching tax-dodgers.

In an industry that still has many non-compliant systems and procedures, this latest statement should also worry Umbrella firms, who may have been operating in a non-compliant way. HMRC are clearly keen to ensure that there is a level playing field across the board, and this will delight those associated with professional bodies such as the AEMC. Colin Howell, Director of AEMC and Co-Director at Crystal Umbrella, states the move by HMRC will help to finally ensure that contractors can work safe in the knowledge that they are doing so without risk. "The AEMC was set up to provide a unified voice and ensure that we are all operating on a level playing field, promoting professionalism, compliancy, integrity and equality - key concepts within both the AEMC's and Crystal Umbrella's principles."

With pressure mounting on HMRC to increase its overall tax take, it comes with no surprise that this measure is being brought into the equation and the clampdown comes after a change of tack by the Revenue's prosecutors last year.

Howell goes on to explain that Agencies and Contractors should expect to see more frequent enforcement actions and warns Contractors that they should do their research before using just any Umbrella in the marketplace. "Before a Contractor chooses which Umbrella to use, they must do their homework as not all those who are in operation are compliant and may not have gone through rigorous auditing, such as those who are members of the AEMC ", continues Howell.

With the severity of these actions enforced by HMRC, Crystal Umbrella invites and implores contractors to use the 4 pronged approach to ensure that they remain on the right side on HMRC.

The challenge does not have to be a daunting one. These four simple steps can ensure that you operate on the right side and remain that way;

Know your IR35 status - this is important because…..

If you don't fully understand or know your IR35 status you are not in a position to make an informed decision regarding the options available to you when choosing a method to trade.This can be very dangerous as an incorrect choice at this stage could bring serious and costly repercussions later.

Chose the right solution for your status -

Depending on the IR35 status of your contract your choice of method of trading may be automatically reduced as not all methods are compliant for a contract outside IR35. On the other hand there are some vehicles for trading that can be used no matter what your status, this is where our expert advice comes into its own. Crystal Umbrella believes that if our solutions are not suitable for you or your contract status, then we ensure we arm you with enough information and advice to make the correct decision yourself.

Chose an audited, UK based, compliant supplier -

No matter what provider or supplier you settle on, choosing one that has been audited is the most important factor; it's your responsibility to ensure you choose one that is compliant, financially stable and able to meet their responsibilities to you as a Client. The Association of Employment Management Companies (AEMC) is an excellent place to start your research for that all important, audited and compliant Umbrella.

Police your expenses -

For a long time now some providers have based their marketing solely around the ability for contractors to claim expenses; but ones that may not be wholly due to them. This is a practice which is both damaging to the industry and dangerous for the contractor as miss-claiming of expenses, whether covered by a providers "Expense Dispensation" or not, is classed as fraud by HMRC and carries fines and penalties, or worse a full investigation into all your financial affairs which could be backdated up to 7 years. A reputable provider such as Crystal Umbrella, or those that have been approved by the AEMC, would ensure you understand what you can and cannot claim according to your status.

Remember: Only expenses incurred wholly and exclusively for the contract are claimable.

Crystal Umbrella
30th April 2009

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