HMR&C has recently published draft legislation in The Finance Bill 2011 that effectively closes any loopholes which previously allowed users to avoid paying the correct levels of tax and National Insurance through EBT’s and other Loans Scheme companies. The legislation comes into force on 06th April 2011 - http://www.hmrc.gov.uk/budget-updates/autumn-tax/wms-aa.pdf.
“… the Government is introducing legislation to tackle arrangements involving trusts or other vehicles used to reward employees which seek to avoid or defer the payment of income tax or National Insurance Contributions (NICs).”
The legislation also includes anti forestalling measures that mean from 09th December 2010 any income received through such schemes must be taxed as full income (PAYE).
“In addition, anti-forestalling provisions apply to the payment of sums (including loans) and the provision of readily convertible assets for the purposes of securing the payment of sums (including loans) where the sum is paid or the asset is provided between 9 December 2010 and 5 April 2011 where, if paid or provided on or after 6 April 2011, they would be caught by the legislation.”
An Umbrella Company does not fall under the remit of an EBT due to the fact that it processes payments to its employees through PAYE. Umbrella Companies therefore continue to remain an excellent option for contractors who don’t wish to set-up their own limited company.
If you would like to discuss registering with ContractorUmbrella you can contact one of our expert advisors on 01206 713680 or email us at firstname.lastname@example.org.