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Agency bring in stricter rules for umbrella companies

Agency bring in stricter rules for umbrella companies

As of yesterday any gangmaster or umbrella company that abuses the tax free allowance travel scheme will have their licences revoked by the GLA.

The Gangmasters Licencing Authority warned back in November 2008 that enforcement action would be faced by organisations that did not comply with the clear guidance they have issued.

The chairman of the GLA, Paul Whitehouse said they will now ‘be examining all such schemes carefully and firms that are running non-compliant schemes may find their licenses revoked.’

The new guidelines for gangmasters and umbrella companies state that at least the national minimum wage must be paid to all employees. Expenses payments should not be counted in this minimum wage payment and if it is found that they do, the licence holder would be in breach of the standard and will have his licence revoked. Similarly, in cases where licence holders force workers to pay a fee for calculating and arranging for them to participate in a travel scheme, their licence will be revoked.

It is possible to legally reduce tax and NI liability through travel schemes but only when the licence holder can prove that the worker has actually incurred the expenses. Again, a breach of this regulation will lead to licences being revoked.

This new clampdown comes after it was discovered that some workers on the minimum wage were receiving an actual salary of just £97 for a full-time working week because more than half of their weekly salary was attributed to expenses. This can leave employees with insufficient contributions to enable them to access benefits such as pensions, Jobseeker’s Allowance and Employment and Support Allowance.

In addition to the GLA clampdown, HMRC is set to recover tax arrears and national minimum wage from companies who abuse travel schemes. Currently the Treasury loses around £0.5 billion annually due to the continued use of this loophole.

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