Contractors and umbrella agencies have been long listening to the online media discussing the reforms to the private sector off-payroll working rules (IR35) that were to come into effect from 6th April 2020. However, due to the unannounced outbreak of the COVID-19, the UK government has delayed the reforms until 6 April 2021. Moreover, the UK government has already confirmed that this is just a delay.
The off-payroll reforms ensure that the self-employed employees working via their own limited company pay similar taxes(Income Tax & NIC contributions) as the directly employed pay. This will be affecting contractors working via their own limited companies since they will be paying equal taxes but will not be able to equal employment benefits. The new Off Payroll reforms will give employers the assessing rights for IR35 status.
Similar reforms have already been made to off payroll working rules for the public sector in April 2017 and now these changes are all set for the private sector.
How the Off-payroll changes affect Contractors and Umbrella agencies:
While contractors are caught up in the middle due to the upcoming reforms, Umbrella companies employing contractors via PAYE can help them out. The new rules transfer the responsibilities for determining how the contractor’s salary will be taxed from the contractor and their PSC to the ‘client’. Therefore, working under an umbrella can benefit contractors since the agency will be responsible for deducting taxes as contractors will be their employees.
“With an increasing number of firms adopting ‘umbrella-only’ engagement models, it stands to reason that contractors trading flexibly stand to grasp more opportunities,” says Professional Passport CEO Crawford Temple.
However, contractors need to be aware of schemes that sell themselves as ‘umbrella’, claiming to offer higher take-home pay.
When choosing an Umbrella, contractors should check for FCSA Accredited Member seal of approval. A legally operating Umbrella will offer contractors with the following:
- Employ you
- Offer you all statutory rights & benefits of employment (holiday pay, sick pay, pension etc)
- Offer you the flexibility to work for different clients
- Consolidate your pay from numerous hirers into one pay packet
- Process the full amount of your gross pay via PAYE
- Will be responsible for tax and NIX deductions
Amid all what’s going on and what’s going to come next year in the form of Off-payroll reforms, contractors have been left wondering if working through their own personal service companies will benefit them in any way. While they are looking for a way out, Umbrella agencies can be one of the options that is available.
If you are a contractor and looking out for an Umbrella agency, we can help you!!
Reliasys Umbrella Service has been designed keeping in mind the needs of the contractors. It is a hassle free service with continuous support from our expert team. Moreover, we are Professional Passport accredited and run a solution that is fully compliant with the current regulations offering you complete peace of mind.
We can help contractors in the field of:
- Education Contractors
- IT Contractors
- Medical and Healthcare Contractors
- Social Service Contractors
Contact Us At:
Address: Suite 322 162-168, Linen Hall Regent St, Soho, London W1B 5TB.
Phone: 020 3500 2615