Umbrella Companies are sensing a bonanza due to new Government rules within their own departments. On September 15th the Government is bringing in rules for its own departments which say that any contractor earning more than £220 a day who has been there for more than 6 months must prove that they are at Low Risk of being caught for IR35 or they must either become an employee or pay their full whack of IR35 tax. This is where Umbrella Companies may come in as another option. If contractors can’t prove they are at Low Risk of IR35 then, rather than become an employee or pay IR35, they could join an Umbrella Company. This is an in between options for them – not as good as operating under a limited company but not as bad as paying IR35 tax and definitely not as bad as becoming an employee. Brolly owners are hoping that this become a feeding frenzy of new contractors for them. Although there won’t be the same benefits that they would get from running a Limited Company, contractors will still be able to claim some expenses which they wouldn’t be able to do if they were permanent employees or were paying IR35 tax.
These new rules are yet another blow to contractors. This was a knee jerk reaction by the Government to supposed ‘scandals’ in the newspapers and the Government felt they had to be seen to be doing something. However, it means that Government departments will have less access to key experienced staff and a more flexible workforce. Umbrella Companies, however, will not worry about that if they get lots of new contractors into their ranks. It looks like they have now become the new favoured vehicle of the Government and HMRC. They don’t appear to want to see contractors in Limited Companies any more.
For a selection of good Umbrella Companies check out Which Umbrella Company