Umbrella Companies | An introduction to Professional Passport

Professional Passport

Professional Passport, an independent organisation, is a well-established body committed to ensuring its members abide by strict compliance standards. Founded in 2007, Professional Passport has over 70 members offering various payroll services to contractors, freelancers and agency workers in the UK. These include traditional umbrella companies (PAYE), CIS payroll providers, and contractor accountants.

On the Professional Passport website, they state:

“Our compliance standards go further and are designed to not only ensure that providers we recommend operate compliantly within HMRC tax rules but also across the many other areas of legislation that apply. We require the highest level of transparency in their operations to ensure workers are clear on any arrangements entered in to.”

As an independent organisation, Professional Passport is run by Managing Director Crawford Temple. The business doesn’t have any shareholders or investors who belong to organisations within the supply chain, showing that Professional Passport has an unbiased approach to ensuring compliance amongst its members. Crawford is also in frequent correspondence with HMRC, and is often attending meetings to help shape legislation and stay up to date with the latest developments.

If you’re seeking an umbrella company for your payroll, we highly recommend choosing one that has obtained Professional Passport accreditation or a provider that is a member of the FCSA. Both regulating bodies are dedicated to ensuring the supply chain of temporary workers is compliant and operates in accordance with HMRC rules and legislation.

 

Eliminate risks by choosing a Professional Passport accredited umbrella company

By choosing a Professional Passport accredited umbrella company, you’re choosing a payroll provider that has been able to prove it meets strict compliance standards. Therefore, you won’t have to worry about an HMRC tax investigation in the future – unlike those who have used a non-compliant provider, possibly to avoid paying their fair share of tax and National Insurance Contributions.

Professional Passport will not allow the following payroll models to obtain membership

The contractor payroll sector has seen numerous “models” introduced as alternative ways to pay temporary workers. While some have been widely accepted as efficient and compliant, many have breached existing rules and regulations and could be considered disguised remuneration schemes. The Professional Passport website includes a list of the payroll arrangements that they do not consider compliant and therefore would not grant Professional Passport membership. The list is interesting, and some of the structures may sound familiar. We’ve summarised them below.

Elective Deduction Model

An arrangement that means workers are considered self-employed and pay taxes (PAYE). It’s usually adopted by low-paid workers and disregards holiday pay and the National Minimum Wage (NMW).

Umbrella Companies that sub-contract to PSC’s

The Professional Passport website states that they “approve any provider who uses the umbrella to sub-contract to PSCs and operate as a ‘Fee Payer’ within the terms defined through the Off-Payroll Working Legislation.”

Pay Day by Pay Day

A set up where workers often received under the NMW because expenses were offset for tax relief. According to Professional Passport, this isn’t a common model any more.

Mini Umbrella Companies

We’ve written about these before. Mini umbrella companies are a tax avoidance arrangement and could land you in a lot of trouble (by altering Employer’s National Insurance, and sometimes, VAT).

Loan Arrangements

Loan arrangements (loan schemes) are the most common type of disguised remuneration scheme. They pay workers with a loan that isn’t expected to be paid back – meaning tax is avoided. These must be avoided and will never be accredited by professional bodies such as Professional Passport of the FCSA.

Offshore Schemes

Arrangements where a worker’s income is sent abroad to avoid UK taxes and National Insurance. Usually, these schemes will target vulnerable contractors and will offer pay retention upwards of 90%.

VAT Concession for Nurses

Professional Passport makes it clear that HMRC has told them this type of arrangement is not available to umbrella companies. Therefore, if an umbrella is offering it – they’re acting non-compliantly.

Conclusion

It’s interesting to see what payroll arrangements are not eligible for accreditation from a professional body dedicated to ensuring the supply chain of temporary workers is compliant. As you can see from the arrangements listed above, they are non-compliant, and many are blatantly tax avoidance schemes. However, it’s great to see them listed like they are on the Professional Passport website – so you can be sure what a dodgy arrangement looks like – allowing you to run in the opposite direction.

 

Interestingly, Professional Passport do not share their compliance standards

Unlike the FCSA (who have made their Codes of Compliance available for the public on their website), Professional Passport do not broadcast their compliance standards. We were curious why this is, but their website answers the question directly.

Here’s what they have to say about their compliance standards:

“When we receive an enquiry from a provider our first step is to spend a day with them to understand what they do. We provide no details of what we are looking for, merely that we are looking at their current offering. This gives us a clear understanding of that provider’s offering and knowledge.

This work ensures we accurately highlight any shortfalls and are able to fully advise a provider.

At the end of this process the provider will understand our compliance standards and once any remedial action has been taken, we would be able to carry out a review.

The compliance review documents their processes and procedures across all their offerings as well as obtaining supporting evidence that demonstrates a robust and consistent application of those processes.

Whilst we do carry out periodical checks on the financial standings of providers we do not have any day to day control of their finances and therefore recommend that members carry out their own financial due diligence on providers they are considering.”

Professional Passport constantly updates its compliance standards to adapt to an ever-changing marketplace, and they offer the only insurance-backed compliance review. Therefore, they’re confident in their compliance standards. This sends a very positive message to their accredited payroll providers and those who require such companies’ services (including contractors, freelancers and agency workers).

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