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Contractor accountants are specialists who provide tax advice and accountancy services to independent professionals who work for themselves often via their own limited company. The contractor accountant can provide a range of accounting services to suit the individual needs and requirements, to generally include annual accounts, company tax returns, payroll, quarterly VAT returns, company secretarial matters, tax planning advice and liaising with HMRC amongst others.
This term refers to any structure including a company that is based offshore (i.e. not in the UK) that offers services to UK recruitment agencies and/or freelancers.
Generally, companies that are incorporated offshore fall outside of the remit of HMRC, meaning, in some cases, even though they are engaging workers in the UK, the offshore entity is able to avoid paying the correct level of UK tax and National Insurance, resulting in a loss in tax revenue to the Exchequer.
Not all offshore companies use their location to avoid paying tax, but those that do place their workers, and the entire supply chain at risk of debt transfer under the Offshore Intermediaries Legislation.
Meaning ‘Pay As You Earn’, this term refers to the method of paying Income Tax and National Insurance Contributions (“NICs”) in the UK.
Your employer will deduct and pay your taxes to HMRC ‘as you earn’, i.e. with each payment your employer makes to you.
Where we refer to PAYE in the recruitment sector, often it refers to working as an employee of the agency, where the agency pays you directly for the work you undertake.
If engaged by a compliant umbrella company, the payments you receive will also be paid under PAYE, however, the assignment rate paid to the umbrella company by the agency should be increased in order for the umbrella to account for the employment costs it incurs, which the agency would pay directly if it employed you.
Is a ‘Preferred Suppliers List’ that recruiters will use to identify companies that they are happy to work with, such as specific umbrella companies, that that they have vetted, and deemed compliant.
With more and more legislative change giving HMRC powers to transfer debt throughout the contractual chain, it’s vital that recruitment agencies understand the difference between compliant and non-compliant providers and having a PSL allows the agency to closely regulate the type of businesses it engages.
This is another term used to define a limited company and is most commonly used with reference to a company that contains a sole director/shareholder that supplies services to an end hirer, often through a recruitment agency.
The PSC (or limited company) supplies the services of its worker, but is legally considered a separate entity to the worker, unlike those workers that operate as traditionally self-employed sole traders.
Workers that operate via their own PSC will often receive payment for their work through a mix of salary and dividends if working outside of the IR35 legislation, or just employment remuneration if working inside IR35.
This term is used to define self-employed people who run their business for themselves and take full responsibility for its success or failure. Unlike working through a personal service company (PSC), there is no separation in law between the worker, and the business. This means that if anyone decided to start legal proceedings regarding the work done, this case would be brought against the individual, in contrast to a worker who uses a PSC, where it would normally be the company facing the court case, instead of the worker personally.
A self-employed person has no statutory employment rights and will not ordinarily pay tax to HMRC until the end of the tax year, although some types of National Insurance may be payable during the year.
© Freelancer and Contractor Services Association Ltd 2024
