Jargon Buster

Helping you join the dots between confusing jargon and digestible information

This is legislation that requires employers to register all eligible employees on a company pension scheme.

Agency Workers Regulations (AWR) is designed to protect the working and employment conditions of contractors, freelancers and temporary workers.

An insurance policy to cover you if your client cannot pay the invoices it owes you.

A facility where your clients remain unaware that debtor invoices have been sold to a third-party invoice discounter.

Is a process to manage the flow of cash through the business and ensure that invoices are paid in accordance with the terms of supply.

This is where you withdraw cash from your finance facility into your business bank account from the available funds.

This is compulsory for any limited companies that have (or intend to have) any employees. It covers claims made against a limited company by its own personnel for any injuries or illness caused during work.

When a third party agrees to buy your unpaid invoices for a fee. Factoring involves an invoice financier managing your sales ledger and collecting money owed by your customers themselves. This means your clients will know you’re using invoice finance.

A party within the supply chain that sits between the end hirer and the worker. These can include recruitment agencies and other companies like a PSC, or umbrella.

This is when you are lent money against your unpaid invoices at an agreed percentage of their final value.

Is a form of legislation that seeks to stop false self-employment of an individual who is operating as a contractor through a PSC, if the work being undertaken on that assignment would be no different if they were fully-employed by the end client. Individuals within IR35 are deemed to be temporarily employed and must account for PAYE and NICs on all earning from that assignment. Individuals outside IR35 can receive their remuneration as a mix of salary and dividends.

The maximum level of compensation for claims against firms declared in default.

This is a legal structure where the shareholder is protected from any liabilities the company may incur.

This is a corporate structure that places workers and contractors into a group of between five and eight people as shareholders in a limited company owned and run by a service provider. MSC legislation was introduced in 2007 to stop the use of Managed Service Companies (MSCs) by removing the associated tax advantages for contractors working through them.

National Insurance Contributions – A levy imposed by the government on all employed earnings.

Legislation designed to stop income tax and NIC avoidance schemes that involve the use of offshore companies. The legislation makes the UK based intermediary responsible for the PAYE and both employer and employee NI deductions for the worker.

This piece of legislation came into effect in 2014 to stop false self-employment. It outlines the framework to determine whether a worker should pay PAYE & NICs on earnings and who has the liability if this does not happen.

Pay As You Earn. This is the tax payable on all employed earnings, whether full/part time, temporary/permanent staff.

Personal Services Company, a Limited company structure whereby the director is providing services personally. E.G. a single person limited company.

The P32 report is a record of all payments due to HMRC processed in respect of all employees on the payroll for each payment period in the tax year.

The Employer Annual Return must be completed by companies and returned to HMRC by 19th May each year. Box six of the P35 is specifically targeted at contractors.

Real Time Information means employers, suppliers and pension providers need to file payroll information online to HMRC every time a payment with statutory deductions is made.

The accounting structure containing all sales invoice details.

Your company’s annual accounts.

The manner in which an end hirer is able to impose itself on the undertaking of the workers services whilst on assignment. Under current legislation relating to engagement between end hirer and worker, the worker must be treated as an ’employee’ and account for the relevant PAYE & NICs on all earnings on that assignment, if they are subject to the right of supervision, direction or control by the end hirer. The agency needs to prove to HMRC that SDC does not apply.

A generic term used commonly for an employment intermediary. NOTE: There are many different models operated by umbrella companies and the liability sits with the agency supplying the end hirer to ensure that the relevant PAYE and NICs is accounted for on all earnings if there is any element of supervision, direction or control by the end hirer.


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