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.
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:
'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.
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.
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.
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.