Considering the amount of coverage in the news regarding the the loan charge situation it still amazes me that companies are still offering these dubious workarounds.

Loan charges are illegal and should be obvious by their amazing return on a wage yet people are still being fooled.

In the latest recent news six alleged promoters of fraudulent loan charge schemes have been arrested following raids on both residential and business properties across England.

Five men and one woman were questioned under caution by HMRC officers in regards to the schemes they were offering.

The raids took place across addresses in London, Guildford, Stevenage, Stratford-upon-Avon, Sevenoaks and Tonbridge – where documents and electronic devices were seized.

These ‘loan’ schemes effectively allow individuals to fraudulently evade paying taxes by paying the contractors wage by means of a ‘non-repayable’ loan which isn’t subject to tax.  As you can imagine this allows the operator of the scheme to levy an attractive ‘fee’ without having to much of an impact on the contractor’s final take home wage.

A big part of the problem is that not enough has been done to educate contractors on these schemes causing many to fall foul of the actions that HMRC are currently taking.

Yes HMRC are going after the people offering these schemes but they are also going after the people that have fallen foul of them claiming back the unpaid tax.  I won’t go into detail the effect this has had on these contractors but it is well documented in the press, and online.

Education on these schemes do not fall at anyone’s feet: yes HMRC should spread awareness but it is getting that information in front of people is the problem and furthermore encouraging them to read it.

At Payments Pro Umbrella we often have conversations with prospective employees/contractors explaining the ‘too good to be true’ scenarios that some have been offered.  The bottom line is you should always be paying tax and NI, usually working out around the 20% mark of your wage.  Other than that the only other non-voluntary deduction will be the fee taken by the payment provider.

At Payments Pro when giving an estimated quote to a contractor, our model takes in to account the HMRC deductions and our fee so we can provide a quote that is more realistic.  We can detail each estimated deduction so the contractor will know where their money is going.  This is something every payment provider should be doing.

There should always be tax, NI and NIERS deduction and these should be roughly the same across all payment providers.  The only difference should be the fee margin.

If you are a contractor looking for an umbrella then always ask about your tax and deductions. And remember: if it sound too good to be true then it most likely is.

If you are currently looking for an exceptional umbrella payment provider then look no further.  Payments Pro Umbrella is one of the UK’s most transparent and reliable umbrella providers.  Give us a call on 020 3819 7220 and speak to one of our Client Experience Managers to find out how we can help you.

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