It may look like a duck but it's not a duck!
As always, after a raft of new legislation from HMRC, there are those whose first thought is & lsquo;there must be a way round it’. The latest bright idea is for providers to set up PSC’s for individual contractors but then run them under an umbrella company. Ah you say, but that contravenes the MSC legislation! In fact, it doesn’t as the contractors’ earnings, less the provider’s margin are all processed through PAYE. So, you ask, what’s the point? Good question. The point is that the scheme provider is attempting to bypass all employment legislation by stating that the contractors are all self-employed.
This means that there is absolutely no benefit to the contractor at all as they lose all entitlement to any of the Statutory payments e.g. sick pay or maternity pay, which they would have via a traditional umbrella company but there is every benefit to the scheme provider as they have virtually no responsibilities whatsoever.
There is however another problem in that the business model allows the minimum wage laws to be flouted as they only apply to employed workers. This means that unscrupulous companies can pay as little as they like to contractors whilst, at the same time, depriving them of any legal rights.
Recruiters should be aware that, on the surface, these business models look to be perfectly safe – they are UK based, process earnings through PAYE, don’t ask for the workers to register as sole traders but sources at HMRC have indicated that they have severe concerns. It is likely that providers of these schemes are going to find themselves under the spotlight sooner rather than later.