Umbrella Companies for Public Sector Contractors
We are now seeing a massive take-up of umbrella companies for public sector contractors.
This is due to the Government changing the rules for contractors who work in the private sector.
They have now taken the IR35 decision out of contractors hands and it is the Government department who will now decide a contractor’s status.
The contractor can appeal this – to HMRC.
(Pause for a chuckle)
New Online HMRC IR35 Test
HMRC are telling us that they are devising an online IR35 test which will show whether a contractor is inside IR35 or outside it.
Of course, it will do nothing of the kind.
It is the laws of the land and the courts which decide that.
They have already told us that they are going to ‘cheat’ with this test.
Even before they have unveiled it they are telling us that they expect 90% of contractors to fail it.
How can that be?
Currently more than 90% of contractors are OUTSIDE IR35.
Indeed, when HMRC investigate contractors for IR35 they have a very low success rate.
And they must surely be picking what they see as the likeliest candidates.
Keep Using Their Personal Service Companies
Of course, most public sector contractors would prefer to keep using their personal service companies.
However, they are taking a big risk if they ask to sit the online IR35 test to try to prove their status.
The results are relayed to HMRC.
If the contractor fails the IR35 test, and has previously been using a personal service company on previous contracts, he, or she, is a prime target for investigation.
Government Picking on Contractors in the Public Sector
It’s easier for the Government to attack contractors in the public sector than in the private sector.
To hit those in the private sector they have to change the IR35 legislation.
Then they might have to fight long battles in the courts.
With public sector contractors they can just change their ‘house rules’.
After all, employers can make any rules they want when hiring contractors.
No Longer Taking Contractors Using Personal Service Companies
Some Government departments are now taking the easy way out and saying that they will no longer take on contractors using personal service companies.
The news on contractor websites has been about the number of contractors who have either quit the public sector because of this, or who plan to before it comes in during early April.
Umbrella Companies for Public Sector Contractors Option
However, an even bigger story is about the number of contractors who are dumping their personal service companies and going en masse to umbrella companies.
There is a big sudden uptake in umbrella companies for public sector contractors.
Sudden Demand for Umbrella Companies
Another contractor website owner told us that he was snowed under by public sector contractors wanting umbrella companies.
A provider of umbrella company services told us that they are snowed under too.
They are telling us that they are getting one contractor applying to join them from a public sector department and then getting the contact details from him, or her, of other contractors in the department who want them to contact them about joining them.
It’s an absolute stampede of public sector contractors out of PSCs and into umbrella companies.
Many more are doing this than leaving the public sector.
I’m sure that many more of them would like to quit.
Public Sector Business and Systems Knowledge
However, the reality is that their skills and business knowledge pertain to the public sector and they are not going to be at the front of the queue for contracts with banks, telecoms companies or oil companies.
So, for many, the reality of the situation is that they have to join umbrella companies.
And that is what most are doing in their hundreds and thousands.
It looks like it is umbrella companies for public sector contractors now for the most part.
Ad – Simply Umbrella – Simply the Best
New umbrella product Simply Umbrella came into being to solve this problem.
It adheres to all the new tax rules. They created it after the Chancellor’s spring statement.
It’s just like other umbrella companies in that the contractor is an employee of Simply Umbrella but they get to keep far more of their money than through an ordinary umbrella company.
It could be a great solution for both public sector contractors IR35 problems and indeed any contractor.
To find out more just click on Simply Umbrella.
Or simply fill in the form below and they will be in touch.