We are hearing of umbrella providers that are looking to offer a service where they would subcontract services to a contractor’s limited company where there has been an inside IR35 assessment.

We first saw this following the introduction of the legislation into the public sector however the debt transfer rules left any resulting debts with the fee payer. The proposed changes impact this liability and provides the opportunity for HMRC to transfer this back up the chain to the recruitment company or end client.

We cannot see a commercial reason for this offering as contractors inside IR35 will generally take home more through an umbrella than operating the contract through their own company. The providers we have seen operating this model to date are typically making their own assessments of status and often pay the workers PSC gross.

Professional Passport will not approve any provider operating this structure as it is impossible to ensure ongoing compliance.

An umbrella company is a company that employs the workers through an employment contract and applies PAYE to all their earnings.

As we have seen before with many compliance questions to providers you may not get an accurate answer back. This is a further reason why you should only use independently accredited providers.