Main Areas of compliance for Umbrellas
If you have been contracting regularly for the last few years one can assume that at some point you will have come across the phrase 'IR35 legislation.' IR35 has been the bane of many contractors' lives for a long, long time and it is certainly the most unpopular piece of legislation ever aimed at one sector of workers.
The aim of the IR35 legislation is to stop people leaving full time employment and then returning to the same job immediately as a contractor working through their own Limited company, in order to reduce their tax liability and their NI payments.
Agency Workers Regulations
The Agency Workers Regulations (AWR) were brought in on the 1st October 2011, were applicable to all 'agency workers' and were aiming to give them all the exact same work and employment conditions that they would have been given if they had been working directly for the end client (rather than through an agency) doing the same job
GAAR came into effect on the 17th July 2013 and was introduced in order to counteract any 'tax advantages arising from any tax arrangements that are abusive.' The legislation is built around the fact that tax arrangements exist (and have always existed and will probably always exist) wherein obtaining a tax advantage is 'one of the main purposes' of those arrangements.
On 6th April 2014 Onshore Employment Intermediaries legislation (false employment) was introduced as part of the 2014 budget. The aim of this legislation is to make sure that those recruitment agencies who hire self-employed traders who are actually employees (working on behalf of their long-term clients) take responsibility for deducting PAYE income tax and NIC's from their gross pay.
During the 2013 budget the UK government announced that they would be consulting on making changes to the regulations on Offshore Employment Intermediaries in order to put up more of a deterrent against NIC and PAYE avoidance schemes. HMRC has been investigating various schemes that attempt avoidance using offshore intermediaries and which mostly try to avoid secondary employer Class One NIC's.
Agency Workers Regulations Guide
What Is AWR? The Agency Workers Regulations (AWR) were created with the aim of protecting temporary agency workers by ensuring that the basic employment and working conditions they experience is equal to that of workers recruited directly by the hirer to do the same job.
Why Umbrella Companies Offer Agencies A Safer Way Too
There are currently more than 200,000 workers operating through umbrella companies in the UK and the number has been growing every year. As legislation and ever decreasing tax breaks makes PSC's ever more difficult to work through umbrella companies are fast becoming the default setting for new and old contractors alike. It is easy to see the appeal for contractors as the umbrella is seen not just as offering hassle-free contracting but also a safer and more HMRC friendly way to conduct business.