Stop notice 32

Arrangement details

The user receives an offer of employment from an end client/agency for which they require an umbrella company. In this instance, users are joining Company X (CX) as their chosen umbrella.; The user signs an employment contract with CX which allows them to provide their services to end clients. In relation to payment, it states at section 3.1.2 that CX will pay the employee at the National Minimum Wage/National Living Wage (NMW/NLW). The examples of contracts received byHMRCstate that in addition to theNMW/NLWRate payment they will also be considered for a periodical discretionary profit sharing bonus. There is, however, no explanation of how these are calculated. The contracts also state that the user may be required to spend a week or more sourcing CX new business in the form of future client assignments for the user.; The user also enters an agreement with Company Y (CY) based in Cyprus, under which CY agrees to make payments (‘Grantee Payments’) to the scheme user in consideration for which the scheme user agrees to enter into an Annuity Agreement (contained in a schedule to the agreement). The annuity only becomes payable once CY pay an ‘additional fee of £500 which is expressly stipulated as being for this purpose. The earliest date the annuity can be entered into is the latter of 300 consecutive days during which no Grantee’s Payments are made by CY or the date of the additional payment of £500’. If executed the term of the annuity is 20 years (or earlier if under terms of the agreement) and payments are 10% of the total of all Grantee payments.; Paragraph 3 of the Cypriot agreement identifies that CX and CY are parties to a mutual Service Agreement.; CX enters agreements with end users/agencies which permit users to perform their contracts and permits these end clients/agencies to pay the amounts earned in relation to the services provided by Scheme Users to CX when invoices are received per below steps. Without such contracts the agencies/end clients would not contract the services of CX employees and steps 6 and 7 below would not be possible.; It is reasonably inferred that CX invoices the end client/agency for the work undertaken by the users.; The end client pays CX for the work undertaken by the users who then pay users and provide payslips which show payments at theNMW/NLWin line with the Employment Agreement. This payment is subject to tax and NI deductions. However, bank analysis shows that the payments made are always higher (at least in the case of analysis of several users’ bank statements) than is declared on payslips/RTI. It isHMRC’s suspicion that these include the Grantee’s Payment made by CX on behalf of CY (no payments appear to have been received by users from CY), however, there is no explicit evidence of such.