The IR35 reforms are starting to pick up pace; end-clients, recruitment agencies and contractors are beginning to find out where they stand. Whilst this article isn’t aimed to distinguish between all those nuances, it is aimed at providing further information to those contractors who find themselves on the end of an ‘inside’ IR35 determination.
For an inside IR35 determination, the options predominantly boil down to being PAYE (pay-as-you-earn, essentially paying the correct tax and NI on every payment received) in some shape or form.
You could:
· Receive income into the limited company as a ‘deemed employee’ – payments into the limited company are made with all PAYE and employer deductions
· Become a permanent employee of the end-client
· Be paid PAYE by the recruitment agency directly as their employee
· Choose a compliant umbrella company (FCSA accredited) to consolidate your payments as an employee of the umbrella company
The first three options may not be available in all cases – some recruitment agencies won’t yet have the ability to pay a limited company as a deemed employee (and you may not want to be as you don’t get employment rights). In other scenarios, going permanent won’t be an option and many recruitment agencies don’t have their own in-house payroll facility. For many, using an umbrella company is therefore a logical choice.
What is an umbrella company?
An umbrella company allows a temporary worker to have one employer (the umbrella company) despite carrying out multiple assignments for several recruitment agencies or end-clients. The umbrella company allows continuous employment throughout.
Typically, the recruitment agency or end-client will send the umbrella company a ‘contract sum’ – an amount of money that includes not only the pay to the worker but also the employment costs (such as employer’s NI, pension and holiday pay) associated. The umbrella company deducts the employment costs from the contract sum received, retains a small margin for the services provided and what is left is the worker’s taxable pay.
What are the benefits of an umbrella company?
There are many benefits of an umbrella company:
· Continuous employment across multiple assignments; useful if you’re applying for a mortgage or for SMP/SPP eligibility
· Don’t need to set up employment with every new recruitment agency you carry out an assignment with
· Full suite of employment rights including SSP, SMP/SPP, pension and holiday pay
· Personal accident insurance
· Emailed payslips every week and text message alerts to let you know what your net pay will be
· Tax efficient saving with our pension provider, NEST
· Choose an umbrella company that has thought about disaster recovery; we’re cloud based and our team can operate from anywhere in the event of a disaster to ensure payments
· FCSA accredited. We’re fully compliant and have the accreditation to show it – the FCSA is recognised across the UK as a badge of excellence so you can continue your employment with Clipper Contracting wherever you go.
Give Clipper Contracting Group a call today on 01305 233170 to find out how we can help.
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