Mike Lowndes, managing director of Exchequer Solutions Ltd, has resigned as a member of the board of directors of compliance body Freelancer & Contractor Services Association (FCSA), ContractorUK has learned.

Mr Lowndes’ resignation comes after the umbrella company run by Chester was found by a judge to be liable for what was described as a ‘mega’ £11million in tax linked to the contractor’s expenses.

Warrington-based Mr Lowndes voluntarily resigned yesterday, stepping down from the FCSA role he was elected to in November 2021, apparently for no other reason than the decision against his umbrella.

His resignation after just six months in the job follows ContractorUK’s request to the FCSA over his suitability to serve on the board of a compliance body, as his own apex company was found to be non-compliant by a court. .

“FTT is wrong in several areas”

But speaking through the association, Exchequer Solutions Ltd (ESL) said yesterday it ‘firmly’ believed the ruling in favor of HMRC was ‘wrong in several areas’.

ESL will therefore appeal against the judgment of the first level court, delivered by FTT judge Robin Vos, which, overall, went against the umbrella in two areas.

First, the “several thousand” Exchequer contractors between 2013/14 and 2016/17 were “not” bound by a global employment contract, and therefore should “not” have had their expenses reimbursed in tax free.

Second, and also contrary to what the umbrella argued, ESL was “not entitled to reimburse living expenses based on the benchmark scales” because the company had “not” requested or received HMRC waiver.

“The global contract is only part of the challenge”

Carolyn Walsh, the agency’s legislation expert, explains: “HMRC found that the ESL worker’s part of the income was treated as travel expenses paid net of tax and without NI, and this builds on the PAYE legislation; the implication of a global employment contract was therefore only part of the challenge.

“HMRC warned the industry in 2015 that the way umbrella companies deal with expenses would change; which it did with the abolition of derogations in 2016 and the granting of the tax allowance on travel expenses reimbursed only when the temporary worker/porter does not work under supervision, direction or control.

Boss of umbrella company CWC Solutions, former tax inspector Ms Walsh, added: “ESL’s defense was that a global employment contract was in place and the rules that apply to intermediary workers do not therefore did not apply to their ‘employees.’ Yet the court rejected this on a number of grounds.

“For the doomed call, the only defense I can see would be [to argue] that the intermediary/umbrella worker was not working under the supervision, direction or control of the agency or rental company. But the court did not find it necessary to consider [this] at this stage.”

“Very technical”

FCSA chief executive Chris Bryce yesterday called the issues before the FTT “highly technical”. But also apparently singular.

“HMRC’s case rests almost entirely on the question of the contracts of employment issued by ESL to workers at the time, and whether these contracts were global contracts of employment, or whether each assignment should be considered as a separate job.

“[But] there is no statutory definition of an overall contract,” Mr. Bryce continued. “[And] it is important to note that there are no claims [against ESL]by HMRC or any other party, of any type of fraud or negligence”.

“Insufficient mutuality”

In an attempt to break down the “highly technical” case into digestible terms, ReLegal Consulting said the FTT had indeed found that ESL’s overall employment agreement had insufficient mutuality of obligations to constitute an employment contract.

“In this case, it is the workers who benefited from the lack of deductions and the umbrella company who will have to make up for the losses to HMRC,” said Rebecca Seeley Harris of ReLegal.

“The point was – each individual [contractor] was going to a permanent place of work and was therefore not entitled to payment of travel and subsistence expenses with deductions.

“Sweating Umbrellas, Even Accredited”

As a result, “more than a few umbrella companies” will now “sweat” awaiting the verdict of their legal advisers on their own global contracts, according to tax expert Thomas Wallace.

“And some of them will even be ‘accredited’ umbrella companies,” said Mr Wallace, also a former taxman and now head of tax investigations at HMRC litigation consultancy WTT Consulting.

But at accreditation and compliance body FCSA, Mr Bryce reassured yesterday that for Exchequer Solutions it is “business as usual”.

However, ESL chief executive Mike Lowndes has now given his advice to the FCSA regarding his role as a board member.

At the same time, an FCSA review of ESL’s operations is underway (the third being conducted annually to verify compliance with FCSA compliance codes), Bryce said.

“In place at the time”

In March the association came under pressure when the JSA, which now operates as Workwell, was accused by a contractor of withholding holiday pay amounting to thousands of pounds.

A subsequent investigation by the FCSA of JSA – one of the founding members of the FCSA – cleared the company of violating the codes, even though they were codes “that were in place at the time.” era”.

Since the time of the alleged paid holiday pocketing, the FCSA has strengthened its compliance codes after admitting to ContractorUK that the language they contained was, potentially, “woolly”.

Also since the complaint, JSA/Workwell has had its FCSA membership renewed by the FCSA and, crucially according to another umbrella company, no personnel changes have taken place.

‘Stinks of double standard heaven’

“Today’s case from Exchequer Solutions absolutely stinks of double standards heaven,” began the brolly, Orca Pay Group.

Orca CEO Robert Sharp explained: “Former FCSA Chairman Chris James retained his role during allegations of withholding paid leave from the umbrella contractors he was director of – JSA, which became Workwell.

“But we are now told that ESL manager Mike Lowndes has given up his FCSA role of his own volition, perhaps simply because the spotlight is now on FCSA, and certainly because a court has found that his Exchequer Solutions owed HMRC a mega £11m in excess.

“Many in the industry will see Mr. Lowndes as a scapegoat whether or not the FTT judgment is appealed, and even though he apparently resigned voluntarily.”

“Rush Judgment”

Last night online, an ex-entrepreneur was understanding, saying – sarcastically:

“I wonder how much [of us] box [correctly] predict the outcome of renewed membership review [FCSA is conducting into FCSA member company ESL]?!”

But himself a former entrepreneur, Mr Bryce appealed yesterday against a “rush to judgement”.

He also pointed out that ESL became a member of the FCSA for the first time in May 2020, so “more than three years after the period [in the FTT case]”.

Reflecting the wording used when JSA/Workwell in April 2022 renewed its FCSA membership until March 2023, Mr. Bryce also said that when the ESL became a member it was “in compliance with FCSA codes at the ‘era”.


Orca’s Mr. Sharp is unimpressed. “Where was the so-called benchmark audit that the FCSA does to highlight these expenses [at ESL] if [the alleged underpayment of £11m-plus] dates back to before 2016, when the [HMRC rules] about the umbrella fees have changed? ” He asked.

‘Remember that the FCSA announced the renewal of JSA’s FCSA membership after documents appeared to show that the JSA was taking contractor paid leave…and if it goes through Exchequer Solutions’ [continued] membership, then that would be shameful, given that a court has just concluded [ESL] should have paid millions and millions to HMRC for contractor expenses but failed to do so.

However, a source in the umbrella payroll market is much more lenient with ESL.

“From reading the judgment, it appears to me that Exchequer Solutions were simply using the tax legislation they had at the time. Partly for this reason, I expect them to pass their FCSA [membership] exam.”

“Similar Waters”

“The other reason, though, is that we’ve been in similar waters before,” the source said. explaining:

“Workwell was acquiesced to earlier this year [by the FCSA to have its FCSA membership reinstated]although they are widely believed to have processes in place to systematically withhold paid leave from their contractors.

“While the results of this investigation [into Workwell] have never been made public – even though the FCSA promised that the results would be made public, the FCSA’s charter states that its members “will observe the highest principles of ethics, integrity, professional conduct and fair practices”. Unfortunately, recent history suggests that this does not apply to all members equally.

A spokesperson for FCSA said: “FCSA’s assessment process is unique in the industry, in that it is carried out by a panel of independent and expert professional services firms comprising EY Legal, EY Tax, Saffery Champness, BDO, Brabners and JMW Solicitors who rigorously and thoroughly assess compliance with FCSA’s publicly published codes. »

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