Are umbrella companies IR35 compliant?

An interesting question that we are asked now and again is “are umbrella companies IR35 compliant?” The short answer is most of them are IR35 compliant. However, there might be a few out there online in that you come across which could possibly not be and for that reason we are going to make it clear that Comparison Contractor is IR35 compliant.

One thing that must be noted is that all umbrella companies must act as employers of contractors due to IR35. This means that a contractor must sign a contract of employment before you begin working at an umbrella company. This means that an umbrella company are responsible for paying all of the statutory benefits from Statutory Sick Pay, Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption pay etc. Various umbrella companies make deductions to your pay to cover these benefits as this is usually how these legal responsibilities work.

Sufficed to say this is how most companies whether umbrella companies or not operate. Legally, this is how it should be done as well. You might find the odd company which deducts money to fulfil the liabilities under what is known as the Agency Worker Regulations which should be avoided at all costs.

The only way to be IR35 compliant is to pay your taxes, keep your receipts on what you can claim as expenses and work. For example, when it comes to expenses it is a great idea to keep all of the receipts that you have and then send them to HMRC when they decide that it is time to check your accounts. Luckily, most umbrella companies are understandable with this and inform you that you won’t need the receipts when claiming expenses with them, however keep them for HMRC related stuff. Of course, a reputable umbrella company will never let you claim expenses that you haven’t incurred, as most will check your expenses claims to ensure you are on the right end of the stick with HMRC.

In the simplest manner to put this statement, you cannot be approved by HMRC as there is no such thing as a HMRC approved umbrella company. At the end of the day, you cannot protect yourself, company or anyone in that manner from investigation from HMRC. Umbrella companies that advertise this are lying and are most likely to receive prosecution from HMRC if they advertise this.

If you are going with one of the larger umbrella companies, then there is a possibility that you might receive special dispensation from HMRC and the umbrella company. However, this is pretty rare as this kind of special dispensation comes after years of talks with certain people within HMRC.

You will find that some umbrella companies have a special arrangement with certain recruitment companies. This might be something along the lines that the umbrella company pays a certain time of referral fee for the clients which have been recommended. This can be helpful to both parties and is great way to establish business to business relationships. Some would ever have an exclusive arrangement where all potential contractors are referred to one umbrella company. This is of course, advantageous towards umbrella companies however, it might not be seen as a positive way going forward for contractors as they are limited to just one umbrella company and have less choice all around.

This is a choice that you will have to make for yourself, we cannot make that choice for you. However, we can try and provide you with all the information we can gather here so you can make the choice yourself. Which is what we have tried to do! You can read one of the articles that we have written about this very question right here https://comparisoncontractor.com/the-choice-between-contractor-umbrella-or-a-limited-company/

As you might be able to tell, we have quite the assortment of in-depth knowledge on this subject for you to sift through. Therefore, we are going to keep our articles up as long as we can so that our readers can make the most of all of the information we have gathered.

Here at Comparison Contractor we provide all of the contractors that come to us with 100% factual information about anything they wish to know about. You can find yourself the job of a lifetime with our company as we are honest, dedicated and want nothing more than to see you succeed in whatever industry you are in. That is why, we care about your future and the potential that you have as a contractor in one of our umbrella companies.

If you would like to learn more about us here at Comparison Contractor then all you have to do is fill out one of the many contact forms we have across our website. If you decide to fill one of them out then you will receive a call from one of our helpful team, they will then guide you on the best course of action going forward for your benefit. It is just that simple here at Comparison Contractor, as we really want to help anyone that comes through out door.