Dispensations and Umbrellas Back to home
Before considering this page you need to understand the principles behind dispensations - please read my Shout99 article from January 2007 - reproduced here.
If it is scale charges that are of interest follow the link from the home page.
Umbrellas - dispensations being withdrawn?
Umbrellas - dispensations being rewritten to disallow expenses for the first site?
If HMRC find something wrong who pays the penalty?
Umbrellas dispensations being withdrawn?
There seem to be moves afoot to scrutinise dispensations in respect of Umbrellas companies - possibly to withdraw the dispensation - at worst to withdraw retrospectively and charge penalties. I have seen one such letter today - it questions the validity of the contract, asks questions that will involve hundreds of man hours to answer and threatens penalties. We will have to wait and see what transpires but I believe that all umbrellas need to be aware of this possibility. HMRC say that compliant umbrellas with not be stung by a retrospective withdrawal but I think that any umbrella who has not had a dispensation approved within the last 6 months needs to be on their guard. HMRC are looking for the existence of overarching contracts. Working in conjunction with a fellow Shout99 expert I was recently consulted by a company where the dispensation had been withdrawn - the contracts were revised and a fresh dispensation was approved. Because of the current rumours I telephoned the Inspector who authorised the dispensation - he confirmed that it complied with all current HMRC guidelines - this was in the first week of February 2008. I am confident therefore that I have the answer.
Umbrellas - dispensations being rewritten to disallow expenses for the first site?
Again rumours are rife and this I have seen although in a slightly different format - a format that was reported on Shout99 some time ago where the umbrellas will pay expenses under deduction of tax for the first site and then see if the employee stays for a further assignment. If he does then the first workplace is treated as being temporary with the tax deducted being paid over to the employee. If the employee leaves then the tax deducted is paid over the HMRC. The rumours are that the first site will be permanent whether the employee remains or moves on but again the dispensation referred to in the previous paragraph has passed that test and all expenses are paid tax free in accordance with the dispensation.
If HMRC finds something wrong who pays the penalty?
When HMRC grants a dispensation the employer has to comply with requirements that are set out by HMRC at the time. Any failure to do so and the employer is responsible.
However, if the employee makes a false declaration to the employer then it is employee who is responsible.
For example - the employer fails to comply
with audit requirements and as a result reimburses travel expenses for non
qualifying journeys - employer penalised. Compare that with the employer who
complies 100% with audit requirements laid down but HMRC discover that the
employee had provided the employer with false information e.g. claimed mileage
for travel in own car when actually travelled by train. Employer had no reason
to disbelieve the employee - employer complied with all audit requirements
- the employee was dishonest in the claim - the employee is liable.