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Radio 4 profile umbrella companies and contracting

by Susie Hughes at 12:22 06/06/16 (News on Business)

Confusing legislation for contractors working through umbrella companies was confronted by the BBC’s Money Box programme this week.

Presenter Paul Lewis invited Crawford Temple, chief executive of trade body PRISM, into the Radio 4 studio to tackle the issue. The programme confronted a common misconception that contractors pay two types of national insurance - employer's as well as employee's NI. Mr Lewis described a situation where a contractor engaged on a relatively low income through an umbrella company could end up paying more tax and national insurance than someone earning nearly £100,000 a year. Mr Temple explained that contractors only pay employee’s NI, in accordance with HMRC rules, while the umbrella companies pay the employer’s NI. He told the programme: “Because of the structure of the contracts, the money coming into the umbrellas effectively is the umbrellas’ money which allows them to make the deductions.” Advertisement Contractors who choose not to be paid through PAYE by an agency are paid more to take account of the deductions the umbrella company must make, including employer’s NI. Mr Temple said: “It’s confusing and I think if there’s a takeaway for a contractor, it would be to ask your agency what the PAYE rate is and the limited company rate and what they will find is that most of the responsibly-run providers will then give them an illustration to show which one provides them the best route. “We have been pressing the Government to carry out a strategic review because we don’t believe the tax system has kept pace with the modern business world and the engagement models that are in place. “We’ve received quite wide party support on that. The legislation is becoming so complex an individual worker can’t understand it.” Review PRISM secured the signatures of 55 Parliamentarians on an open letter calling on the Chancellor to launch a strategic review. The proposal was then tabled as an amendment to the Finance Bill by the SNP after consultation with the PRISM. It is yet to face a vote in the Commons. The trade body for employment intermediaries wants to see legislation evolve to take account of the flexible way millions of contractors choose to work outside the traditional modes of employed and self-employed workers. Tweet -- If you wish to comment on this article, please log in and use the Reply button below. Registering is free and easy - see 'Join Shout99'. - Susie Hughes © Shout99 2016

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