Will changes to IR35 see Umbrella Company usage soar?

It appears as we move towards the April 2020 IR35 Private Sector changes that many recruiters anticipate umbrella company usage to soar ahead of the implementation.

The research comes from a survey ran by the Association of Professional Staffing Companies (APSCo). The results showed that 91% of agencies polled believe that an increasing number of contractors will shun personal service companies (PSCs) and turn to umbrella companies due to the new rules that come into effect next April causing umbrella company usage to soar.

When the same group were asked if they expect most of their contractors to agree to working ‘inside’ IR35 after the changes come into effect, two thirds (67%) said ‘no’.

So with only 8 months left before the changes are brought into force, could we see a rise in umbrella companies? Could we see other schemes appear that will no doubt leave contractors in trouble under the Loan Charge scheme?

The simple answer is yes! Umbrella companies will appear and some companies will suggest they have found loopholes in the legislation which will benefit the contractor. But we all know that it would be more beneficial for HMRC to see as many people under employment taxes as is feasible. More monies and less work! But fundamentally the changes simply place the onus on the end client to make the decision of the IR35 status, so if you are able to prove to the client that your working practices place you outside IR35 then there shouldn’t be a problem – surely? However, if we look at the Public Sector changes then we can place a good guess that many companies will opt for blanket decisions.

HMRC have stated that they will frown on blanket decisions, but whether this will be the case who know’s. Do they have any incentive to investigate when the coffers are being lined with full employment taxes? We shall see…

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