As you may have noticed there are a number of claims made in the industry which can leave people confused as to what is right or wrong, legal or illegal. So we thought we would keep an eye on what is going on in the industry, what people are saying about umbrella companies and let you see if you can discover the Truth Behind the Claims!
Umbrella Company Claims
20th September 2012
Opus Management offer Focus Managed Service Trust (FMST)
"An Example of FMST benefiting a Contractor. A Contractor works for 6 months on a project and earns £100,000. He is able to have the trust hold £50,000 of that income to be taken over to the next tax year. He then pays Tax and NI on the £50,000 that he has. If the contractor is not able to secure a role the following year then he is able to request the £50,000 from the trust to form his second year's salary and is taxed on that with the advantages of another year's allowances. This is exaggerated but shows the point. This is a real benefit to contractors working in this recessionary environment."
24th September 2012
Alternative Remuneration Schemes / Loan Schemes
Some of the more complicated remuneration schemes involve foreign currency loans and foreign exchange deals. While it would be nice to be able to profit risk free from exchange rate fluctuations, this is, sadly, not the case.
Gambling on whether or not a currency will devalue can result in large profits, but also in spectacular losses, as the Bank of England experienced in 1992 when it took on George Soros.
When outright foreign exchange risk is mitigated by the use of forward dated contracts, it is easy to be fooled into thinking that forward foreign exchange rates are a predictor of currency exchange rates in the future (if only it were that easy!). Forward currency exchange rates are derived from a differential measuring the gap in interest rates between two similar currencies, so any perceived gain / loss in the future is offset by interest costs. From a tax perspective, HMRC consider that, apart from holiday money, any appreciation in foreign currency is considered to be a capital gain and taxed accordingly.
CU Responds: HMRC is very clear on this. Any loans made by a company to an employee, contractor or otherwise remunerated individual, have to be repaid within a specified period of time. If this is not the case, then they are considered to be payment and taxed accordingly.