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IR35 finance concept. United Kingdom tax law, tax avoidance

More contractors are considering umbrellas because of IR35 reforms

One of the biggest reasons for the introduction of IR35 reforms to the private sector has been because of the prevalence of Personal Service Companies (PSCs).

The Government originally saw the ‘exploitation’ of PSCs as a vehicle for ‘tax avoidance’ when IR35 was first introduced in 2000.

Although the term PSC isn’t actually defined in law, part of the reason for private sector IR35 reform is to battle underhand PSC models, and get the correct National Insurance Contributions from contractors who should otherwise be classed as employees.

IR35 reform is the Government’s way of redefining what it means to be an ‘off-payroll worker’.

A key part of the reform means that it’s no longer the responsibility of the contractor to determine their IR35 status – it’s now the responsibility of the client that engages in a working relationship with the contractor.

And though IR35 has been opposed by numerous groups and even MPs over the last few years, when it comes to PSCs, we feel that IR35 can only be a good thing.

We don’t mean contractors starting a limited company and working for themselves, by the way – especially if that arrangement best suits the way you work as a contractor.

When it comes to PSCs, there are some schemes out there, run by shareholders, that are specifically designed to avoid paying tax and exploit the freelancers and contractors who sign up to them.

The introduction of IR35 reforms to the private sector, though, will hopefully go a long way to closing down exploitative PSCs, and giving contractors more confidence that they will keep the money they earn.

Why contractors are considering the umbrella model

Some good news our team is hearing on the ground, too, is that more and more contractors are exploring the services of umbrella companies in the wake of IR35 reforms.

We think that’s great. The right umbrella company can provide contractors with far more security and transparency than a PSC scheme, and also provide them with much more practical support.

That support can extend to same-day payments, for instance, or by taking the weight of administrative tasks from their shoulders so contractors can spend more time doing what they do best.

Crucially, too, a good umbrella company will be able to provide expert IR35 advice and assistance to contractors, to help them comply with the new legislation as quickly as possible and to optimise their wider working lives.

We’re here to help contractors find those umbrella companies – it’s the Greatpay way!

At the same time, contractors also have to research and do their due diligence on umbrella companies, to see if they’re a trusted entity and find the right one for their needs.

That’s where Greatpay can help. We only operate with umbrellas who have been found to be accredited or compliant by a high-level independent advisor, to make sure that contractors are always able to choose a quality service that suits your needs.

We’ve helped contractors find the right umbrella companies and services for years. If you’re considering partnering with an umbrella, especially now that IR35 is here, Greatpay is here for you.

Find out more about the benefits of partnering with the right umbrella company by contacting Greatpay’s specialist team today.

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