Stop notice 36

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 as their chosen umbrella.; The user signs an employment contract with Company X. The employment contract dictates that the employee will provide services to the end clients. In regards to the employee’s payment, paragraph 3.1.2 of the contract states that the salary is defined as ‘at the national minimum wage (or if applicable, the National Living Wage) rate’.; The user also enters an agreement with Company Y (based in Cyprus) under which Company Y 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 Company Y 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 Company Y 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 Company X and Company Y are parties to a mutual service agreement.; Company X 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 Company X when invoices are received per below steps. Without such contracts the agencies/end clients would not contract the services of Company X employees and steps 6 and 7 below would not be possible.; It is reasonably inferred that Company X invoices the end client/agency for the work undertaken by the users.; The end client pays Company X for the work undertaken by the users who then pay users and provide payslips which show payments at theNMWRate in line with the Employment Agreement. This payment is subject to tax and NI deductions. However, bank analysis shows that the payments made are higher than is declared on payslips/RTI and it isHMRC’s suspicion that these include the ‘Grantee’s Payment’ made by Company X on behalf of Company Y.