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Umbrellas - dispensations being withdrawn?
If HMRC find something wrong who pays the penalty?
Umbrellas dispensations being withdrawn?
Following on from the recent consultation document it seems as though Umbrellas have had a reprieve. There was a worry that legislation would be introduced that would effectively have seen off umbrellas but this was not the case. Instead HMRC are going to use their existing powers to deal with those Umbrellas who they deem to be abusing the system and/or encouraging employees to claim expenses that are not due. 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. 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.
For Umbrellas who may be concerned regarding the validity of their contracts I will review the contract/dispensation/expense policy free of charge.
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.