The UK government has launched a new beta tool aimed at helping umbrella workers and employment businesses estimate take-home pay and understand deductions. Available now on GOV.UK, the tool, the launch comes in response to growing concerns over tax compliance and transparency in the umbrella sector, highlighted in the recent Budget.
A step towards clarity?
The tool allows users to calculate gross and net pay based on their assignment rate, shedding light on deductions applied, such as National Insurance contributions and tax. It’s designed for anyone working through an umbrella company, as well as recruitment agencies, to better grasp the financial implications of such arrangements. However, it only supports calculations for the current tax year and provides the most accurate results for those between the ages of 21 and State Pension age.
Industry reaction
Crawford Temple, CEO of Professional Passport, commended HMRC’s efforts, stating:
“We welcome HMRC’s initiative and the introduction of a payslip checker as we applaud any action and steps taken that works to increase and promote compliance across the market.”
Temple acknowledged that the tool is a promising first step but emphasised that visible enforcement of compliance remains a critical need. He urged HMRC to harness the data it already holds, such as Real Time Information (RTI) and Employment Intermediary Reporting, to further bolster compliance measures.
“The levels of non-compliance are at an all-time high in the industry, and let’s hope that this new checker will be a useful addition to HMRC’s armoury to raise standards and compliance,” Temple added.
Comparisons with CEST and ongoing challenges
The release of this tool, which is still in beta form, could draw comparisons by some contractor service commentators to HMRC’s Check Employment Status for Tax (CEST) tool, which in the past faced criticism for its perceived inaccuracies and oversimplifications in determining employment status under IR35 rules. However, CEST is now considered a safe and useful free tool for contractors by employment status experts such as Rebecca Seeley Harris of ReLegal Consulting, following the Supreme Court’s decision over the matter of mutuality of obligation and control in the PGMOL case, which could face a fifth hearing.
Implications for Contractors
Umbrella workers will not necessarily be off the hook if their umbrella company miscalculates tax contributions. Responsibility for compliance ultimately lies with the umbrella company; however, workers could face backdated tax bills if HMRC identifies non-compliance. This underlines the importance of selecting a reputable umbrella company and maintaining personal vigilance in tax matters.
For contractors forced into umbrella arrangements due to IR35 compliance requirements, this tool offers a potential lifeline for navigating complex pay structures. It allows individuals to double-check their payslips and deductions against HMRC’s benchmarks, potentially uncovering errors or discrepancies.
What’s next?
As the tool remains in its beta phase, further updates and refinements are expected. The government’s broader agenda to improve the regulatory framework around umbrella companies continues to evolve, including the possibility of a single enforcement body to address malpractice.
For now, contractors considering inside IR35 roles should leverage this tool as part of their due diligence process when engaging with umbrella companies. Transparency and informed decision-making remain crucial in a sector rife with compliance challenges.
For more information or to use the tool, visit the official page: Work out pay from an umbrella company – GOV.UK.
