Umbrella Companies set to soar

Umbrella Companies set to soar

Following changes to off-payroll working in the public sector in 2017, research from APSCo found that 55% of professional recruitment companies had witnessed a drop in the use of PSCs, with most of this movement into umbrella companies. A survey of the trade association’s membership revealed that 91% of the professional recruitment firms polled believe that an increasing number of contractors will turn to umbrella companies in response to the new rules that come into effect in April 2021.

As part of the Finance Bill 2020, the government published the draft legislation for extending IR35 rules to the private sector from next April. Although contracts that are worked through an umbrella company aren’t affected, contractors who use both an umbrella company and a limited company payment structure should be aware of the changes. If you are continuing to use a limited company then the key points are as follows:

  1. The end client will be responsible for working out whether your contract falls inside or outside of IR35, taking this responsibility away from you. They will also be responsible for communicating this decision directly to you
  2. Your end client will need to complete a status determination for you – this is to try to stop the practice of ‘blanket rulings’ that place all contractors inside IR35. The status determination must give reasons for the client’s decision
  3. A new ‘client-led status disagreement process’ will be introduced. If you disagree with your status determination you’ll only be able to appeal to your client, who may have an interest in your contract falling inside IR35
  4. Small companies, as defined by the Companies Act, will be exempt from the new legislation for the time being

While an umbrella company offers an effective solution for contracts that fall inside IR35, it’s also worth remembering that not all umbrella companies are the same. Following changes to IR35 in the public sector, there was a sharp increase in unscrupulous umbrella companies who were willing to exploit contractors’ wishes to make up some of the shortfall in income because they were being taxed as employees.

It’s critical that anyone seeking to engage an umbrella company ensures that they are able to differentiate between ethical providers and those that are selling non-compliant solutions. Amaze Umbrella, for example, is FCSA accredited for umbrella services, meaning that we submit to the highest levels of compliance auditing. Here’s what to look out for in a compliant umbrella solution, and what to avoid.

To find out more about how Amaze can help you call: 0161 464 8993

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