04/11/21

UK: FCSA revises member charter following outcry over offshore solutions.

As published on contractoruk.com, Thursday 4 November, 2021.

The Freelancer & Contractor Services Association has revised the wording in its membership charter following concerns from MPs over offshore umbrella arrangements.

In a letter to MPs, the FCSA’s Phil Pluck all but apologises for the words at section 1.1, stating members shall be UK-based and “not provide more than 25% offshore solutions.”

The association’s charter now states: “FCSA Members shall be UK-based firms that do not provide more than 25% of their operations outside of the UK.

“The FCSA does not permit offshore arrangements/solutions or structures that seek to evade or avoid UK tax regulation or employment rights as set out in the FCSA Codes.”

Clearly a response to the MPs’ concerns, the latter statement does not reflect a new development and nor does the former statement, outlined Mr Pluck in his letter to the MPs.

“1.1 of the FCSA Charter is not new, but it was decided to make a new reference to it…[to] more closely replicate…the wording that runs throughout the Mandatory Codes.”

And those codes, he continued citing “A8,” have always stated, “companies…are based in the UK and the significant majority (75%) of your services are undertaken in the UK.”

Given the MPs have now thanked the FCSA for its “comprehensive reply” including its “willingness to admit” to “flawed wording,” the ‘offshore issue’ may be squared away.

But in his reply to the MPs, who sit on the Loan Charge and Taxpayer Fairness APPG, the FCSA’s CEO hints it’s the MPs who are unfair to -- in his view -- make two big implications.

First, that HMRC only uses FCSA umbrella companies (“I do not have that information,” says Mr Pluck), and second, that HMRC used brollies that subsequently offered Disguised Remuneration schemes.

Last night, a former tax inspector said that if HMRC were to only use FCSA umbrella companies when using contractors to work across its operations, it would raise some serious questions.

Insisting all non-PSC contractors HMRC engages use FCSA umbrellas would likely breach “all sorts of civil service rules” on impartiality, said the inspector, who declined to be named.

And, if the FCSA were the only permitted umbrella supplier body to HMRC, it would grant the association a “competitive advantage” over other industry assessors of brolly compliance, the former tax official said.

For their part, MPs are convinced that the FCSA does indeed have a monopoly on HMRC’s inflow of umbrella contractors.

“HMRC themselves have stated, in a Freedom of Information request…[that the department only uses umbrella companies which are FCSA-accredited],” the LCTF APPG begins.

“[Although an] HMRC officer wrongly stated [in that FoI release] that umbrella companies have to be approved by the Financial Conduct Authority, this was later explained to have been an error and that what was meant was that contractors who work for HMRC via an
umbrella company are required to use umbrella providers approved by the FCSA.

“This therefore corroborates what we said in our letter. The issue that remains, therefore, is how HMRC engaged and used contractors using DR schemes despite HMRC stipulating that contractors must only use FCSA umbrella companies – and [despite] you making clear that FCSA accredited companies do not operate or recommend any such schemes.”

Pressed yesterday, Mr Pluck said there was now no disagreement between the FCSA and the MPs, although it appears that there are now issues for HMRC to answer.

“The FCSA are currently responding to the Loan Charge APPG and remain supportive of their aims to stop contractors being exploited via disguised remuneration schemes,” the FCSA’s boss told ContractorUK.

In a statement Mr Pluck added: “The FCSA are not aware of the details by which some contractors working for HMRC may have been offered DR schemes. This has been a matter of discussion between the LCAPPG and HMRC.

“However, FCSA expressly ban the use of such schemes amongst its members and can assure ContractorUK readers that no FCSA member has ever offered such schemes to contractors working through HMRC or any other end-client. To do so would bring about immediate expulsion from the FCSA.”

At the time of writing, HMRC was unable to say if the tax department’s umbrella company usage is confined to those belonging to the FCSA, although a spokesperson for HMRC said the department was looking into the matter.