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Umbrella Pay

Client's payslips show umbrella pay but tax not deducted

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Last year I questioned the "loan" payments to contractors as my niece had fallen foul of the rules and you were very helpful.

The various umbrella agencies have now switched the wording for part of the salary to business pay, umbrella pay or dividends and I'm really not sure how to deal with this on her tax return. I spoke to one agency who include on the Gross Invoice section of the payslip an item shown as "less expenses and tax", This is not PAYE which is shown in the Gross Pay part of the payslip. On the Gross Pay section the salary is split between Salary, Holiday pay and Umbrella pay. The latter has not been subject to PAYE.

I spoke to a payroll manager at the agency who told me that she acquired shares in the company when she became employed by them. Those shares have increased in value and that the umbrella pay is a distribution of the gain that she has made. Part of the "less expenses and tax" is related to that gain. As she has left the agency she will received a calculation showing the gain and the amount of tax deducted. I was told that the agency was doing what their accountants had recommended. These accountants had also stated categorically that the umbrella pay should not be included on the contractors' tax returns.

As you can probably tell, this is not my area of expertise. My client base is mainly impoverished artists and crafts people. I intend to write to the agency's accountant for further clarification (it's impossible to speak to anybody at a high level by phone) but in the meantime I should be grateful for any advice/suggestions. 

Thankfully my niece has now joined an agency which is operating PAYE correctly on her gross earnings.

 

 

 

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By 356B
17th Jul 2019 16:32

As she has left the agency she will received a calculation showing the gain and the amount of tax deducted.

Sit back and wait for an explanation.

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