Umbrella contractors pay tax at employed levels and so there is no need to worry about IR35.
However, it's important to bear in mind the following:

IR35 is a piece of tax legislation introduced in July 2000 to target disguised employment. It uses a complex set of tests to find out if someone is genuinely in business on his own account or a disguised employee of the client.

In essence, IR35 simply says that if a worker is a disguised employee of the client then he/she should be subjected to the same tax and national insurance deductions as other regular employees. IR35 does not therefore affect those paying employed levels of tax (for example, umbrella workers) but does affect those running their own personal service companies (PSCs) and declaring dividends from company profit.

The government has recently been working to improve the administration of IR35, as it's been widely criticised for its complexity.

The fundamental law of IR35 hasn't changed. However, as well as better training for their staff, HM Revenue and Customs (HMRC) have improved their IR35 helpline and guidelines and introduced the Business Entity test.

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IR35 - our advice

What is IR35?

What has changed with IR35 lately?

Who are controlling persons?

Worried about IR35 - what are the options?

Leave it to us - we give tailored advice on what is suitable

Take an umbrella-only approach

  • For those contractors genuinely outside IR35, an umbrella solution prevents them from working within the most tax-efficient vehicle.
  • Agency Workers Regulations (AWR) will apply. Umbrella workers will fall inside the scope of AWR and the agency will therefore need to ensure its contractors meet the basic working and employment conditions. If the agency does choose this route then we can help in meeting the AWR obligations and have an AWR portal to help.

What's our advice?

  • Does the provider offer IR35 reviews on both the contract and working practices?
  • Has the service provider been audited? We hold both the Professional Passport accreditation and are audited by BDO.
What our clients think
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- A. Tattum, Computer Futures
You pay my contractors on time, and sort out any queries / issues quickly. When the occasion has occurred that one of my own or team's contractors has needed payment early you've always accommodated.
- T. Madeley, Computer Futures
PayStream explain the set-up of a Limited company to contractors in a clear and understandable way. This is why contractors are happy to go with PayStream. Contractors find it easy to speak with you about any query.
- R. Thomson, Infinity Resources
  • working as a limited company contractor. This remains a legitimate way of working and continues to be the most tax-efficient. Our IR35 advice will include a review of the contract(s) and everyday working practices. If they fall outside IR35, you won't need to worry about the AWR and pension reform.
  • working as an umbrella employee. If the contractor falls inside IR35, or for whatever reason does not want to set up a limited company, we'll recommend our umbrella service which is compliant and works within the spirit of HMRC rules and guidelines. AWR will still apply.

By working with a provider like us that offers a range of services, your contractors will always get the right one for them. This may include:

Choose a provider that has a strong focus on compliance and offers a choice of services. A compliant service provider like PayStream will weigh up the contractor's individual circumstances and only offer the most appropriate service(s).

Key questions to ask are:

Agency?
Latest News

'Controlling persons' are currently being targeted by HMRC in respect of IR35. A controlling person is thought to be a person who is able to influence the direction of an entity/organisation. This would be someone who has managerial control over a significant proportion of the organisation's employees and/or budget. HMRC believe these persons should be on the company payroll.

There are a number of contractors in important positions in the public sector that are working through a limited company which are now subject to review by the relevant public sector department as to how they are paid (salary or dividends).

In the 2012 budget it was announced that the government would consult on creating a provision in legislation which would formalise the requirement to place all controlling persons on their payroll. This provision would also place the responsibility of deducting tax and National Insurance payments on the engaging organisation as well as making them liable for the relevant employer's National Insurance contributions (NICs). This responsibility currently rests on the PSC.

The proposals are opposed by a wide range of business organisations, who believe that it will likely add another layer of complexity to IR35 when dealing with controlling persons. Nevertheless, it's expected that the provision will be introduced in the Finance Bill 2013.

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Your contractor might want to look at My PSC
Our limited company service.

With My PSC, your contractors can set up and run their own limited company in the most tax-efficient way possible, with minimum fuss. Not only that but if they sign up now they'll get three months completely free. Find out more.

If you or your contractors would like to talk about My PSC in more detail and find out their IR35 status, please call us on 0800 197 6516, or fill in the form below and we'll be in touch whenever suits you.

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Your contractor might want to look at My CIS
Our special service for the construction industry.

My CIS lets your contractors enjoy all of the benefits of their CIS card whilst cutting down on all of that annoying paperwork - leaving your contractors to get on with their job. Find out more.

If you or your contractors would like to talk about My CIS in more detail, please call us on 0800 197 6516, or fill in the form below and we'll be in touch whenever suits you.

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Your contractor might want to look at My Max
Our umbrella service.

With My Max, your contractors can balance the benefits of continuous employment with the advantages of being a contractor. Find out more.

If you or your contractors would like to talk about My Max in more detail, please call us on 0800 197 6516, or fill in the form below and we'll be in touch whenever suits you.

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