Both Ed Balls and Cathy Jamieson have repeated the same claims that umbrella companies falsely inflate the worker’s travel and food expense claims, reducing tax and national insurance, and pocket the avoided tax as profits.
This comment shows a complete lack of understanding of any of the issues according to Professional Passport's managing director Crawford Temple.
"There are many umbrella companies that are responsibly run and comply with HMRC guidelines. These organisations do not represent a tax risk to the Exchequer, quite the opposite, they provide a cost effective solution that is very efficient at collecting taxes and passing these across to HMRC. These same providers also provide their workers with full employee benefits, something that would otherwise be missing."
He went on to say: "Judging by recent statements made by HMRC the issue they are focussed on currently in the onshore market is where expenses are used to reduce tax for the low paid and vulnerable; it is not falsely inflating claims, HMRC refer to these as 'pay day by pay day tax relief'."
He explains: "The providers that operate pay day by pay day tax relief models are effectively allocating immediate tax relief to income based on expenses that cannot be reimbursed. If they were reimbursed the worker would be paid at a level below the National Minimum Wage. HMRC have made it clear, through their statements, that their view of providers that operate in this way is that they go beyond what they are allowed to do within the PAYE Regulations. The responsible providers that operate aligned to HMRC guidelines do not operate these arrangements. In fact they have quite detailed operational processes and procedures to ensure that any expenses claimed are accurate, appropriate and allowable."
Professional Passport have been highlighting another issue to Government for some 18 months; the offshore providers that have no obligation to pay the employers National Insurance. In these arrangements the Employers National Insurance saving, or part of it, is often retained by the provider as additional margin.
Crawford Temple said; "We wrote to Ed Balls following his comments last week and asked that he considers those businesses and operations that are aligning themselves to the highest operating standards and attempting to create a compliant, professional sector before he makes general comments in future. We have now followed this up with a similar letter to Cathy Jamieson."
"The temporary workers market is now a vital part of the UK economy and one of the fastest growing sectors; making these claims is unhelpful and misleading and is likely to ultimately damage the economy."