Five things you should know about your umbrella company’s dispensation
1. Have you seen it?
Whilst you are safe from any risk of third party debt transfer when using an umbrella, most agencies do consider that they have a duty of care to their candidates where they make referrals to specific umbrella companies or indeed rely upon an approved supplier list.
Always ensure that you have a copy of your umbrella company’s dispensation in your possession. Quick pointers are to check when it was issued? – make sure it’s no more than a year ago. Does it have an expiry date and who issued it? The answer to this last question should be the Special Employers Compliance Unit.
2. When was it granted?
In light of HM Revenue and Custom’s recent dramatic ramp up in the enforcement of tax and National Insurance contribution avoidance, it not only makes sense but is essential that the umbrella company you use has a current dispensation.
All reputable umbrella companies will work in cooperation with HMRC to ensure that their business is operating in a compliant manner. For this reason, a dispensation shouldn’t be older than twelve months old. Focused Umbrella received their latest dispensation in December 2012.
Having provided HMRC access to examine every element of their operation as part of the ongoing commitment to compliance and transparency in all areas of the business, HMRC stated “I am granting you this Dispensation because I am satisfied, on the basis of the information you have provided, that no additional tax or National Insurance contributions would be payable by the employees concerned on these expense payments and benefits. I am authorised to do this by sections 65 and 96 of the Income Tax (Earnings and Pensions) Act 2003” Helen Bradley – Specialist Employer Compliance
3. What does it include?
All umbrella companies will be operating with a standard suite of expenses. This will normally include benchmark payments for subsistence, receipted travel costs, hotel accommodation, itemised phone bills, professional fees and uniforms. What the majority will not have is a scale rate for travel.
Focused Umbrella are unique in that HMRC have granted them a dispensation for scale rate travel. This means that your candidates are able to make a claim for travel to work by public transport or car without having to submit any receipts.
Focused Umbrella were granted this rare dispensation as they were able to evidence the average spend of their employees (your candidates). Additionally they could demonstrate such robust expense monitoring and auditing processes that HMRC were fully satisfied they could deliver a compliant non receipted travel allowance
The combination of scale rate subsistence and scale rate travel makes Focused Umbrella the most hassle free umbrella in the market-place, making it especially useable for all categories of temps and contractors.
4. Who does it apply to?
The dispensation will apply to employees working at a temporary workplace.
There are two key components that make an umbrella solution work. First is that the umbrella company employs your candidate. It is especially important your umbrella company takes this responsibility seriously and doesn’t simply rely on a written contract.
Focused Umbrella not only offer their employees guaranteed earnings for the year, but they also provide in addition to all statutory entitlements, free life cover and healthcare benefits such as eye tests and free glasses for work use.
Ensuring your candidate has the same employment rights as those employees sitting in Focused’s office underpins this key requirement to demonstrate that they are all working as permanent employees of Focused Umbrella.
The second component is to ensure that expenses are only paid when someone is eligible to claim them. This relies upon the temporary workplace rule, so ensure that your umbrella is monitoring the location and duration of assignments as the requirement is that each of your candidates should have the intention to undertake multiple assignments whilst employed by your umbrella and these assignments should last less than 24 months and be at different locations.
5. How do they monitor compliance?
A dispensation, quite frankly, is not worth the paper it is printed upon unless your umbrella adheres to the conditions within it.
If your umbrella has recently had their dispensation renewed – this means they will have satisfied HMRC and that they are operating in a compliant manner. Focused Umbrella last had their dispensation renewed in December 2012.
If your umbrella company has only ever held their current dispensation this could mean that it is their first and they have not yet completed a review with HMRC. Watch out for new umbrellas with total receipted expense dispensations, not only will this be inconvenient for your candidates but it could suggest that HMRC have either not yet completed a review with that umbrella or that they were not sufficiently satisfied with the results to grant scale rate payments.
Also look out for any umbrella suddenly starting to trade through a new entity – ask yourself why?
For further information on how dispensations works within an umbrella company then please call 0845 47 47 001 and the team of experts at Focused umbrella will be happy to answer any questions.