Legislation change effecting Umbrella Employees

Thursday 12 April 2018

Optional remuneration arrangements (OpRA) introduced in the Finance Bill 2017, comes into full effect for all umbrella employees on 6 April 2018 after “grandfathering” provisions allowed a 12 month “bedding in period”. This is an extension to the previous salary sacrifice changes that were seen in 2016.

This is an important change to the umbrella industry and has 2 key areas of impact:

  • Business mileage rates for using a private car (AMAP’s) can no longer be processed via salary sacrifice, which means that tax and NI relief on expenses reimbursed to umbrella employees cannot be offered by umbrella companies where it varies their salary. A year end claim via a self-assessment tax return (SATR) for tax only will still be available but the employee will be subject to a ‘supervision, direction or control’ (SDC) test. (Please note that client fully reimbursable expenses are likely to fall outside of the OpRA legislation).
  • Optional variable margin umbrella offerings will also be captured by the OpRA rules and may result in tax and NIC liabilities. Umbrella companies offering a choice between different service offerings at different gross margins will now also be captured by the OpRA rules (e.g. higher margins for payment on a Friday, higher margin for “enhanced” benefits packages). Umbrella companies offering a Net pay deduction for the enhanced margin will not be impacted by OpRA as this isn’t an agreement to vary a salary

Please speak to a member of our agency support team for further information on this change and how it may affect you and your contractors.  We would also recommend that you ask your current PSL providers to advise you how they are complying with the OpRA legislation (particularly in relation to reimbursable expenses and variable margins) to ensure that you continue to meet your obligations under the Criminal Finances Act 2017.

Further information can be found via the link to HMRC guidance on Optional remuneration arrangements:

https://www.gov.uk/government/publications/optional-remuneration-arrangements


By Victoria McDonnell

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