The Umbrella Company Is Now The Uk Government’s Vehicle Of Choice For Contractors

By Author: kunwarpal solanki
Total Articles: 49
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The UK Government announced in their recent Budget that they would be strengthening IR35 (set up in 1999 to flush out freelancers who they saw as disguised employees) and beefing up the numbers in their Compliance Department to catch those who are using Limited Companies instead of paying PAYE.



There was a big outcry from the public recently when it was revealed that senior managers in Government departments, including two of the highest officers at HMRC, the revenue collectors, were putting their wages through Limited Companies and limiting the tax they pay.



The Government used this in their recent budget to say that they would pursue more of those setting up Limited Companies for just such a purpose.



Said Gerry McLaughlin of “The Contractor Umbrella Companies appears to be the Government’s new vehicle of choice. The Conservatives had promised freelancers that they would ‘look at’ IR35 again if they got elected. However, the Panel they set up to ‘look at’ it said that it should be kept in place ...
... and the Government accepted this recommendation”.



The recommendation on keeping IR35 went even further and said that a major reason to keep IR35 was that if it was abolished many contractors would leave their Umbrella Company and work through a Limited Company. As the difference in tax and National Insurance the average contractor pays is reckoned to be £10,000 a year less if they are in a limited company and there are 200,000 Umbrella Company contractors that is quite a difference in Government income.



Said Gerry “It would make sense for the Government to try to frighten more of the estimated one million Limited Company contractors to go in the other direction. That is a major reason for the Government announcing in the Budget that they would be strengthening IR35 and in appointing more compliance officers.



“In these days of austerity the Government knows which side its bread is buttered on – and it’s not the Limited Company side”.



Gerry McLaughlin is the CEO of UK IT Contractor umbrella company website www.ITContractor.com.