3 ms·

Umbrella companies are going to be in for a rude awakening sooner or later As someone who's outside IR35 I can't see the point in being inside rather than just

Umbrella companies are going to be in for a rude awakening sooner or later As someone who's outside IR35 I can't see the point in being inside rather than just taking a full time role with a company, sure there's some flexibility but the disadvantages outweigh the advantages in my view

varispeed 3y ago
There's a common misunderstanding regarding umbrella companies and their relation to IR35 legislation. Contrary to some beliefs, umbrella companies aren't subject to IR35. This regulation is designed for individuals who offer their services through an intermediary which they either manage or hold a financial stake in. However, when you're employed through an umbrella company or a large consultancy, you're considered an employee of that entity, thus IR35 doesn't apply in this context. Therefore, there's no impending "rude awakening" for umbrella companies concerning IR35. The challenge in regulating umbrella companies lies in the similarity of their business structures to those of large consultancies. They operate nearly identically, and differentiating between the two would require an additional, layer of regulation that could potentially face legal objections. IR35 itself is more about preventing professionals from departing large consultancies, establishing direct client engagements, and consequently, fostering competition. Ultimately, many small enterprises begin with the business owners personally providing services until they expand sufficiently to employ additional staff. However, IR35 essentially nips that in the bud and ensures the talent stays in the employment pool, corporations can exploit.
- youngtaff 3y ago
  Apart from agreeing the IR35 applies to people who sell their services through a PSC I have a very different take on to that… IR35 is about making up the loss in revenue of employers National Insurance, as PSC shareholders can avoid NI by paying themselves mainly in dividends rather than a salary. The dividend tax makes up for the lack of employees NI on dividends but there’s no employers equivalent. Large companies use umbrella’s because they don’t want to take on the burden of employing contractors but depending on how the relationship is setup is the umbrella becomes the contractor’s employers (assuming engaged direct rather than through their PSC) and that means the contractor has a whole set of employment rights — sick, holiday, pension that the umbrella is now responsible for

varispeed 3y ago

There's a common misunderstanding regarding umbrella companies and their relation to IR35 legislation. Contrary to some beliefs, umbrella companies aren't subject to IR35. This regulation is designed for individuals who offer their services through an intermediary which they either manage or hold a financial stake in. However, when you're employed through an umbrella company or a large consultancy, you're considered an employee of that entity, thus IR35 doesn't apply in this context. Therefore, there's no impending "rude awakening" for umbrella companies concerning IR35. The challenge in regulating umbrella companies lies in the similarity of their business structures to those of large consultancies. They operate nearly identically, and differentiating between the two would require an additional, layer of regulation that could potentially face legal objections. IR35 itself is more about preventing professionals from departing large consultancies, establishing direct client engagements, and consequently, fostering competition. Ultimately, many small enterprises begin with the business owners personally providing services until they expand sufficiently to employ additional staff. However, IR35 essentially nips that in the bud and ensures the talent stays in the employment pool, corporations can exploit.

youngtaff 3y ago
Apart from agreeing the IR35 applies to people who sell their services through a PSC I have a very different take on to that… IR35 is about making up the loss in revenue of employers National Insurance, as PSC shareholders can avoid NI by paying themselves mainly in dividends rather than a salary. The dividend tax makes up for the lack of employees NI on dividends but there’s no employers equivalent. Large companies use umbrella’s because they don’t want to take on the burden of employing contractors but depending on how the relationship is setup is the umbrella becomes the contractor’s employers (assuming engaged direct rather than through their PSC) and that means the contractor has a whole set of employment rights — sick, holiday, pension that the umbrella is now responsible for