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IR35 and Umbrellas

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Hi all,

I don't have any IR35 clients but have been asked a question and would be interested in your input and anywhere I can learn more about the practicalities.
I have said that I don't currently have any experience in this area, so the reason for my question is that I want to learn more so that if it comes up in future I can know more.

The client does their usual work consulting, support and similar services (consulting on quality systems, supporting improvement of systems, IT Program and systems development, web design and similar) for a range of clients in a normal business manner with many customers through their own limited company and has done so for many years.

They have been interested in the options available through agencies where they may be able to get 3 month at a time contracts that would be part time and not reduce their current business. The work is something they would usually offer to their other customers but the agency has said that it may be assessed as being inside IR35. I understand that it is for the end client to take responsibility now but can they be/run their own umbrella and is there any guidance or information of the specifics of why it would be different.
 
The agency says that they will require the person to be paid through an umbrella, however I am interested in whether this has to be the case, whether there are other options, or if they just have to go along with it if they want to do the work.
Is there any reason that the current Limited Company couldn't be the umbrella if it is insisted that it is inside IR35 and if so, what would the requirements or practicalities of this be?

Any guidance you can give, pointing me in the direction of some more information, and any problems or practicalities you may have.

I know a lot of this will be simple, bread and butter stuff to many of you, but as it isn't something I usually come across I want to understand and learn for the future.

 

Thank you very much for your time and help.

Replies (6)

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By Sandnickel
29th Nov 2021 13:31

An umbrella company is effectively a payroll company. Paying one person through a ltd company would never be an umbrella so the answer to the question is no (unless you actually set up a legitimate agency which would surely be hitting a walnut with a hammer).

The agency shouldn't dictate the terms of payment like this, but in reality they do. If they say that umbrella is the only option then it's unlikely that your client will change their mind.

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Replying to Sandnickel:
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By david_dbu
29th Nov 2021 14:05

Thank you very much for the quick reply.
He will just have to take the umbrella company costs and process, then any 'outside IR35' work could be done the same as any of his other customers. Is that right?

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Replying to david_dbu:
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By Sandnickel
29th Nov 2021 14:25

Yes that's correct.

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By david_dbu
29th Nov 2021 14:59

Perfect, thank you.

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By AK Employment Tax Services
30th Nov 2021 09:05

I agree with the comments that have been made however, your client needs to have a process in place to ensure that the Umbrella company assigned is operating PAYE/NIC correctly on payments made to the worker. Some Umbrella companies are deciding the worker is outside of IR35 irrespective of the view of the Agency and paying the worker gross others are using tax schemes eg the loan scheme. If this was challenged by HMRC and the Agency could not meet the liabilities then they can be sought from your client

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Replying to AK Employment Tax Services:
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By david_dbu
01st Dec 2021 10:35

Thank you.
Certainly something to think about.
Absolutely agree on the loan scheme etc.

The Umbrella making that decision if the end client has determined the role in IR35, plus it hasn't been challenged by the worker should raise huge red flags, but sadly the attraction of being paid gross can be a difficult one for the unknowing to turn down!

Thanks again.

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