Umbrella Companies for Public Sector Contractors – IR35 Choice

Umbrella Companies for Public Sector Contractors

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.

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Finance Bill 2016 – How Contractors Affected by Chancellor

Finance Bill 2015 contractor effects

Finance Bill 2016

So, how will UK contractors be affected by Chancellor George Osborne’s Finance Bill 2016, the details of which he will announce on Wednesday afternoon?

UK contractors felt that they dodged a bullet in the Chancellor’s Autumn statement a couple of weeks ago.

Chancellor’s Leaks and Rumours affecting Contractors

Prior to that there had been statements from the Chancellor, leaks and rumours that:-

  1. He would take away the right of both umbrella company and personal service company contractors to be able to offset travel and subsistence expenses against tax.
  2. He would force clients, who hired contractors for more than a month, i.e. virtually all contractors, to take those contractors onto their payroll. He called these contractors off payroll employees – which shows what he really thinks of them
  3. He, with HMRC, was devising a new online IR35 test. Clients would make contractors sit this new online IR35 test. If they passed it they could operate as normal as contractors. If they failed it they would have to go on the client company’s payroll. HMRC would also keep the results of failed online tests for future reference
Finance Bill 2015 and Contractors

Finance Bill 2015 and how it affects Contractors

Chancellor Osborne’s Autumn Statement

When the Chancellor read his Autumn Statement, most of these were missing.

The only one that was there was only partially there.

He  would still stop contractors who are caught by the Intermediaries legislation (IR35), i.e. umbrella company contractors, from offsetting travel and subsistence expenses against tax.

However, those not caught by IR35, i.e. personal service company contractors, would still be able to offset travel and subsistence expenses against tax.

Chancellor Finds Extra Tax

In a press release, IPSE (ex-PCG) claimed that as a great victory for they, and their members, lobbying efforts beforehand.

This may be true. However, another factor could have been that the Treasury suddenly found an extra £27 billion in tax receipts, which they would get in the next year, meaning that the Chancellor needed less tax money.

This, and the Lords defeat, may have been why the Chancellor changed his mind on Tax Credits.

It may, also, be a reason why he pulled back out the triple threat above.

However, there is a third possibility.

Finance Bill 2015 as it affects contractors

Finance Bill 2016 and its effect on contractors

Anti-Contractor Measures in Finance Bill

That is that he is going to introduce the measure in his Finance Bill which he will produce on December 9th.

Contractors are not out of the woods, or murky water, yet.

It would seem unlikely that the Chancellor will stop personal service company contractors claiming travel and subsistence expenses against tax after saying he wouldn’t a couple of weeks earlier.

Umbrella Company Threat

However, there may be some truth in he second and third threats, i.e. forcing contractors caught by IR35 onto a client company’s payroll rather than using an umbrella company.

That would be an existential threat to umbrella companies.

Good Umbrella Companies Contractors

Good Umbrella Companies Contractors prefer

He may use the Finance Bill 2016 to announce this measure and may use it to announce a new IR35 test which has legal bearing as well.

The life of UK contractors, since IR35 was brought in, has been a constant worry.

December 9th is the next date for contractors to worry about.

Umbrella Company Reviews – Offshore Umbrella Companies

Umbrella Company Reviews for Contractors

Umbrella Company Reviews

Contractors often ask us for Umbrella Company Reviews. We are happy to oblige.

There are two types of Umbrella Company. There are offshore umbrella companies and there are onshore umbrella companies.

The Umbrella Companies HMRC prefer are the onshore umbrella companies. That’s because they get more tax from them.

Tax Avoidance Measures

So, Offshore Umbrella Companies are tax avoidance – but legal tax avoidance. They allow the contractor to keep from 80% to 90% of his, or her, money earned.

Contractors choose an umbrella company or a limited company. The Limited company options returns more to the contractor than the onshore umbrella company. However, offshore umbrella companies return the most.

We have offshore umbrella company lists and onshore umbrella company lists on other pages on this website.

Umbrella Companies Explained

Many of the offshore umbrella companies operate from the Isle of Man.

Onshore Umbrella Companies allow contractors to lay some expenses off against tax. The top umbrella companies are the safe ones.

Contractors can claim travel expenses and overnight expenses against tax as well as a few other things like pension contributions.

Umbrella Company Reviews and recommendations

Umbrella Company Reviews offshore and onshore

Umbrella Company Reviews and Comparisons

With an onshore company you would probably keep about 60% to 65% of the money you earned. With a Limited Company it would be maybe around 75%. With the offshore companies you would keep from 80% to 90%.

There are also companies which operate like the offshore ones but are onshore. They allow contractors to still use their limited companies.

Sometimes, agencies try to steer contractors towards particular umbrella companies. However, the suspicion is that they get commission from doing this. This is illegal under the 2010 Bribery Act – but they still do it.

Working through those offshore umbrella companies is the most lucrative for contractors. Using umbrella companies like that will have returns of up to 90%.

Umbrella Company List

To find some of these offshore umbrella companies, and more umbrella company reviews, you should click on Offshore Umbrella Company List

Contractors who want to find moneymaking opportunities should click on Contractor Moneymaking