The Importance of Compliance to Contractors

Why should compliance be important to contractors? In these difficult times it’s easy to understand the desire to maximise your hard-earned income, but no-one has a magic accounting trick that will legitimately increase your take home pay.  

If it looks like someone has, it’s because they’re breaking the rules. Even so, when non-compliant companies promise you can take home over 90% of your contract rate, you might be forgiven for asking why you should care about compliance.

Breaking the rules will cost you more in the long term.

That 90% take-home figure is only possible if a disguised remuneration scheme is in use. Whatever the supplier tells you, such schemes do not work, and may represent criminal tax evasion.

Let’s assume for a moment that a company who are willing to ignore the law can be trusted to do what they say they will, and you do indeed end up taking home the promised amount. When HMRC investigate and come looking for the additional tax, it’s you that they’ll come to. You can expect to pay any tax you’ve “avoided”, plus interest and penalties for late payment. Far from saving money, you’ll have to pay considerably more.

HMRC are increasing enforcement activity, with additional resources allocated in the 2017 Budget and a broad mandate to take a hard line against avoidance. They’re specifically targeting disguised remuneration schemes, and given that HMRC can go back up to 20 years if they suspect deliberate wrongdoing, it’s almost certain that involvement with such a scheme will cause you trouble and cost you money, the only question is how long it will take.

Compliant providers make contracting easier.

 More and more agencies and clients are refusing to work with companies who are not accredited by a suitable professional body, like FCSA or Professional Passport. They do this partly to protect themselves, because the consequences of working with non-compliant suppliers have become much more serious in recent months, and also because they want to protect their contractors.

Use of a non-accredited umbrella company or accountant will make it difficult to work with well-informed agencies and clients, and you’ll find yourself either changing suppliers or turning down work on a regular basis. By contrast, if you’re with an FCSA Accredited Member it’s likely that most agencies and clients will work with them. This makes for smooth transitions between contracts.

You need to be able to trust the advice you’re getting.  

Are you working inside or outside IR35? Which expenses can you claim? What’s your employment status? What insurance do you really need? Does your agency contract allow you to work directly with your client?

Most contractors are reliant on their umbrella company or accountant for this kind of advice. You need to know the answer you receive is correct, which means you’ll need access to a trustworthy expert. For most, the definition of “trustworthy” won’t include companies who don’t care about compliance.

For that matter, if your supplier is happy to ignore the law, what makes you think the contract they have with you means anything to them? If you know they’ve been less than honest, even if it was to your benefit, how can you trust anything they tell you?

It’s far better to engage with an umbrella company or accountant who you can trust to follow the rules, look after your interests and give you the right advice.

How to find a compliant supplier.

Our advice, to both contractors and recruiters, is to only work with FCSA Accredited Members. If you do, you can be sure that your umbrella company or accountant adheres to the most rigorous compliance code in the industry.

It is true that there are fully compliant companies who are not accredited but unfortunately, it can be difficult to tell them from the rogues. By choosing an accredited umbrella or accountant, you’ll know your supplier has already been vetted, and much more rigorously than you could manage for yourself.  

What to do next.

If you think you might have been involved in a disguised remuneration scheme, if you have questions about contracting or if Orange Genie can help in any way, please call us on 0126 468 483 or email info@orangegenie.com.

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