BBC Radio 4’s Money Box try and improve their understanding of umbrella companies and contracting with help from PRISMs Crawford Temple

Tuesday 21st June, 2016
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Industry news

The BBC's Money Box programme has investigated the confusing legislation that exists around contractors working through umbrella companies.

Presenter Paul Lewis was joined by Crawford Temple, chief executive of trade body PRISM, to try and help the show improve their understanding of the legislation.

One of the common misconceptions of a contractor working through an umbrella company is that they pay two types of national insurance - employer's as well as employee's NI. However Mr Temple explained that contractors only pay employee's NI, in accordance with HMRC rules, while the umbrella companies pay the employer's NI.

Mr Temple told the programme on Saturday: "Because of the structure of the contracts, the money coming into the umbrellas effectively is the umbrellas' money which allows them to make the deductions."

When a contractor chooses to be paid via an umbrella company, rather than on agency payroll, they are paid more to take account of the deductions the umbrella company must make, including employer's NI.

Mr Temple added: "It is confusing and I think if there's a takeaway for a contractor, it would be to ask your agency what the PAYE rate is and the limited company rate and what they will find is that most of the responsibly-run providers will then give them an illustration to show which one provides them the best route."

PRISM have been pressing the Government to carry out a strategic review of the tax system and this is something that they have had quite wide party support on as they secured the signatures of 55 Parliamentarians on an open letter calling on the Chancellor to launch a strategic review.

Mr Temple believes that the legislation is becoming so complex, individual workers can no longer understand it. The not-for-profit trade body for employment intermediaries wants to see legislation evolve to take account of the flexible way millions of contractors choose to work outside the traditional modes of employed and self-employed workers.



PRISM have been pressing the Government to carry out a strategic review of the tax system and this is something that they have had quite wide party support on as they secured the signatures of 55 Parliamentarians on an open letter calling on the Chancellor to launch a strategic review.

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