Office Holders IR35 Legislation
The Chancellor has given Offshore Umbrella Companies a major boost by his new office holders changes to the IR35 legislation. The more that the Chancellor tries to move contractors out of Limited Companies and into Umbrella Companies the more contractors now approach offshore umbrella companies about operating through them. They have been thriving recently.
Of course, the Government would like to knock these out. However, this is proving difficult for them as the companies are not in their jurisdiction. Also the courts have ruled that the system that they use is perfectly legal. This is where contractors are given loans rather than paid income.
PAYE Umbrella Companies
HMRC and the Government would like to see all freelancers in PAYE Umbrella Companies. They don’t want them in Limited Companies. They certainly don’t want them in offshore umbrella companies. However, their policies appear to be driving more and more contractors that way rather than becoming an effective employee of an onshore PAYE Umbrella Company.
There’s a lot to play for here. An IPSE survey showed that there were now 1.6m people who call themselves Freelancers in the UK. Only 200,000 of these are in Umbrella Companies. The Government take around £10,000 in tax and NICs more from an Umbrella Company contractor than a Limited Company contractor. There is a lot of money at stake for the Government. So, they want to herd as many contractors as possible out of Limited Companies and into Umbrella Companies.
However, if those contractors leave the onshore companies, and go offshore, the Government gets nothing at all in tax. They appear to be helpless to prevent this. This office holders legislation will cure nothing.
For a review of offshore umbrella companies see Offshore Umbrella Companies