Contractors not prepared to deal with tax
Over 60% of UK contractors have little or no awareness of key elements of UK tax legislation. That’s according to new research undertaken by FPS Group, the Umbrella Company administrator for contractors, and ContractJobs.com, the jobs board for freelance professionals.
Despite a number of high-profile cases over the last 12 months, nearly half (45%) of contractors are unaware that HMRC is targeting individuals and businesses who seek to minimise their tax contributions. This is particularly worrying when a significant number of contractors (28%) are unaware that they could be personally liable for any unpaid taxes if HMRC judged that their company was using a non-compliant tax structure.
Matthew Huddleston, managing director at FPS Group, said, “Without the safety net of an Umbrella Company operating full PAYE and NI on their payroll, it is critical that contractors using their own limited companies are familiar with relevant financial rules and regulations. However, well over half of contractors with Personal Service Companies (60%) had little awareness of terms such as General Anti-Abuse Rule (GAAR), whilst the majority (58.6%) stated that the recent HMRC crackdown had not influenced their attitude towards payroll decisions. This suggests a worrying degree of complacency in the face of the harsh penalties faced by non-compliant contractors.”
Given these worrying gaps in knowledge, it seems that many contractors are protecting themselves by entrusting their payroll process to a PAYE umbrella company. There is a strong upwards trend in this area, with an increase of 23% since 2012.
Huddleston added, “Contractors want simplicity in work affairs, but they need to be more aware of issues concerning the way they work. With a complex regulatory environment and the threat of HMRC investigations, fines and potentially worse penalties, umbrella companies often provide peace of mind for the individual contractor.”