On inspecting my wage slips i found that as well as my own National Insurance contributions those of Capita had been deducted from my pay too.
On inquiry I was given a confused justification for this from an opperator followed by a longer more 'informed' response below.
When I asked for the citation for the so called 'treasury document' I received no response- point is there seems to be no legal basis for this evasion scheme- I'd like to pursue it- anyone out there know of a lawyer/group who would help with this.
When you consider the way Capita are going for Education and NHS contracts this evasion becomes even more incredible- why no noise from the poiltical class?
The response I received below:
Your enquiry on the legal basis for deductions of Employer’s National Insurance (ERNI) contributions has been passed to me to answer.
I believe your question centred around the legality of deducting Employer’s national insurance from your agency funds as you have been getting conflicting advice on this.
To explain this I need to explain our product more clearly.
Key is an employer of temporary workers and pays them through an ‘Umbrella company’. An Umbrella company is a method of organising your pay to be tax efficient. In other words, we aim to increase your take home pay compared to PAYE and we do this by processing legitimate business expenses.
To make this work in your benefit we distribute the funds received from your agency according to our Employment contract with you and our responsibilities as an Employer.
Therefore, from the agency funds:
· we deduct and pay ERNI, and as these funds are technically Key’s at this point, this satisfies the legal aspect of ERNI being paid by your employer.
· we also deduct our margin from these funds, as the agency does with the funds received from the school for you.
· we then reimburse your expenses, (As these are from your agency funds this reimbursement is not over and above your agreed rate from the agency, but paid out from that rate. The effect of this is to give you tax relief on your claim.)
· the balance of the funds is then paid to you as Gross salary, which cannot be less than the National Minimum Wage.
There is no legislation that I can point to that explains this except for normal PAYE legislation, as we are deducting and paying all taxes as we should but out of your agency funds. (Remember, technically these funds are Key’s monies, and we are arranging these funds to be most beneficial to you.)
I can quote you a passage that comes from a treasury document, referenced below, and is the Treasury’s own definition of an Umbrella company and clearly refers to deductions of both employee’s and employer’s NICs being made:
‘The umbrella company will pay a salary to the worker along with any expenses due and deduct income tax (via Pay As You Earn (PAYE)) and both employee’s and employer’s NICs. The umbrella company will retain its fee, a weekly or monthly sum (generally not charged when the worker is on holiday or between assignments) and may also retain a regular sum to be paid later as holiday pay. Other deductions might include optional services such as insurance. Anything the umbrella company pays the worker, for example net salary, expenses and holiday pay, as well as any income tax deducted under PAYE and both employee’s and employer’s NICs is funded out of the gross sum the worker earns since the company does not normally have any other source of income’.
Consultation: Tax relief for travel expenses: temporary workers and overarching employment contracts S.2.14, July 2008
I sincerely hope this has answered you question and allayed your fears but as it is a lot to take in, I am happy to answer any further questions you have after reading this. If you would like me to call, please let me know the best time of day and number to get you on and I would be delighted to help you further.
t: 0845 371 0303
f: 0845 371 0304