A number of major legislative changes come in to force from the 1st April 2017. If you are a recruitment agency that has contractors working in the public sector and paid through their own limited company, this may significantly impact their earnings.
Where any public sector assignments are seen as Inside IR35, you will have to deduct tax and national insurance for affected contractors as if they are an employee before paying their limited company. This means that there will be no advantage for the affected contractor in taking dividends, loans or utilising expenses in their company. The tax efficiencies of having a limited company will have been negated.
If your affected contractors continue to use their own limited company post-April, they will receive a lower rate of pay. This is because you will be required to adjust your rate to take employment deductions, such as Employers NI, in to consideration. There is also the risk that HMRC could challenge a contractors previous earnings on this assignment once their end client has stated it is inside IR35.
In such circumstances the only way to maintain your contractors current rate is for an umbrella company solution to be used. As one of the most longstanding and respected providers in the marketplace, our Flex umbrella solution ticks all the right boxes for your contractors and provides an immediate solution for their predicament.
If an affected contractor does decide to dissolve their own limited company, this process takes between 2 – 3 months to complete, so it is worth them starting this process at the earliest opportunity. If they leave their company dormant, they will continue to incur fees from their accountant throughout the period and have to do statutory filings and self-assessments as and when required.
Ultimately, the choice is theirs. If your agency requires assistance further to these changes please speak to us before the 1st March 2017 as your contractors will need to be setup and ready before the changes take effect in April 2017. Contact us now for more information and a free no obligation discussion.
Call on 0800 634 4848 today