Contractor Roles - Being pushed to using umbrella firms?

[Too Late]

Hi all

Just browsing the market and have applied for a few roles. 2 of them have come back and have told me the role is only available if i move to one of their approved umbrella companies (parasol, Giant to name a few)

they say its for IR35. I currently work under my Ltd and have never been asked to move to an umbrella company for a contract. This is my second now.

Any ideas why?


Thanks
Nick

[Too Late]

The reply i got explaining why:
Yes the reason being is simply because the project is government funded as they are dealing with Cancer research and Rare diseases, this means that it falls within IR35. Because of this it has to go through an Umbrella company because of tax implantations if you was to have a ltd company and tax wasn’t paid correctly the business itself would be liable for this.

[hyphen]

Has been the case for a while - public sector is being discouraged to use IR35 exempt contractors after lots of media attention.

[Too Late]

hyphen said:

Has been the case for a while - public sector is being discouraged to use IR35 exempt contractors after lots of media attention.

Thanks for the reply. I just suddenly thought there might have been something dodgy going on.

Thanks
Nick

[Eric Mc]

How can that work out cost effective for the entities hiring?

[hyphen]

Tax revenue increases leading to more public spend I suppose.

[chunder27]

Be VERY VERY careful of being pushed to preferred umbrellas.

I was a victim of this a few months ago and found out to my financial cost what it means, and it means a lot in real money terms. Changing can save you 15-20% of a weekly wage believe me.

They are preferred because they are taking and giving backhanders as they are pushed to every contractor.

But the problem you might face is that if you sign up, you might NOT be able to get out of it and switch, which is my problem now.

Try compareumbrella, they will offer you simple advice, and could save you hundreds of pounds a month, honestly I have just tried them and they were very honest, reasonable and clear.

It's a bit murky some of this as Osborne the **** shafted umbrella contractors a few years back with no expenses etc, so the rules are tougher, but there are still ways round it.

But shop around and ring up, your agency should be able to offer you a list, ring them ALL and compare their fees. You might be surprised at the differences.

I have been done, and probably can't get out if it without a fight, but please take my example, and ring around. As they will shaft you out of hundreds of they can, and they do very little to warrant it.

[hyphen]

As above rightly says, the agent has no legal right to have a preferred umbrella, and their client likely won't be aware of any such shady practices.

[bigandclever]

Too Late said:

tax implantations

Lovely stuff.

[Chuggaboom]

Just because the clients (public sector bodies from Apr 17....proposed all ie inc private bodies from Apr 18) have been forced by the revenue to declare whether a contractor role is in or out of IR35 has no legal implication as whether the contractor has to operate via an umbrella co.

Its just the agency trying to reduce their risk of being chased by the revenue if the contractor does a runner and doesn't pay the appropriate taxes via his Ltd company.

Find a different agency.....ie one that effectively doesn't accuse you of false declarations before the event and allows you to declare inside IR35 and correctly pay the appropriate taxes due after deducting your allowed 5% and pension contributions.

[theboss]

Chuggaboom said:

Just because the clients (public sector bodies from Apr 17....proposed all ie inc private bodies from Apr 18) have been forced by the revenue to declare whether a contractor role is in or out of IR35 has no legal implication as whether the contractor has to operate via an umbrella co.

Its just the agency trying to reduce their risk of being chased by the revenue if the contractor does a runner and doesn't pay the appropriate taxes via his Ltd company.

Find a different agency.....ie one that effectively doesn't accuse you of false declarations before the event and allows you to declare inside IR35 and correctly pay the appropriate taxes due after deducting your allowed 5% and pension contributions.

As I understand it, for 'inside IR35' contracts the public sector client is required to deduct the relevant tax and NI contributions before paying the contractor's Limited Company - they can't just say "you're inside IR35 mate", pay the Ltd gross and rely on them to inform HMRC and make the necessary payments.

Its therefore not the same as a contractor deeming themselves to be inside IR35 and operating accordingly.

It therefore stands to reason that public sector clients will want to use agencies/umbrellas who are equipped to do this on a large scale.

If they do form a contract directly, they'd be having to adopt the back office capabilities to process payments in this manner.

[anonymous-user]

I would tell them to shove it personally.

[4x4Tyke]

DoubleTime said:

I would tell them to shove it personally.

This.

[Chuggaboom]

theboss said:

As I understand it, for 'inside IR35' contracts the public sector client is required to deduct the relevant tax and NI contributions before paying the contractor's Limited Company

If that were the case then effectively the contractor would be on the client's payroll, and the client would not able to defer those obligations to another body ie an umbrella co, which under Co law is no different from any other company re invoicing, expenses and taxes.

Also the client would have to provide pension options too.

The IR35 change of policy brought about in April for public sector only changed the deciding organisation as to whether inside or outside from the contractor to the client, and nothing to do with the method of receiving payment.

[schmunk]

Chuggaboom said:

The IR35 change of policy brought about in April for public sector only changed the deciding organisation as to whether inside or outside from the contractor to the client, and nothing to do with the method of receiving payment.

Nope:

https://www.gov.uk/guidance/off-payroll-working-in...

"Where the off-payroll working rules apply and you pay the intermediary directly, you’ll need to deduct tax and National Insurance from payments you make to the intermediary."

https://www.gov.uk/guidance/off-payroll-working-in...

"In the public sector, the public authority is responsible for deciding if the off-payroll working rules apply to an engagement. Where they do, the fee-payer (the public authority, agency or other third party who is responsible for paying the worker’s intermediary) must:

• calculate a deemed direct payment to account for employment taxes associated with the contract
• deduct those taxes from the payment to the worker’s intermediary
• report to HM Revenue and Customs (HMRC) through Real Time Information (RTI) the taxes deducted
• pay the relevant employers’ NICs"

[Chuggaboom]

And as someone else said somewhere on PH, what is written on the IR website is sometimes inaccurate, incorrect and/or not actually reflected in law.

That guidance runs ruff shod over pension law for instance !

[schmunk]

Chuggaboom said:

And as someone else said somewhere on PH, what is written on the IR website is sometimes inaccurate, incorrect and/or not actually reflected in law.

That guidance runs ruff shod over pension law for instance !

Nope again:

http://www.legislation.gov.uk/ukpga/2017/10/schedu...

[alfie2244]

Well worth a peruse IMO.

http://forums.contractoruk.com/#contracting