Having blogged extensively on the legislative changes coming into effect on April 6th, 2017, the key consideration for all contractors operating within the Public Sector is, if ‘I engage with an outsourced payroll provider (via an Umbrella solution) what impact will it have on my earnings?’
First and foremost, Umbrella, unlike Ltd Co & operating as a PSC with the Public Sector, remains a solution that is robust, compliant and has longevity.
Don’t forget, for those operating within the Public Sector, any previous benefit of flat rate VAT will be eroded post-April 6th, along with the removal of the 5% deduction for general expenses.
In addition, Umbrella as a solution will;
• Likely deliver an optimal net pay result
• Provide reduced operating fees as the margin for Umbrella will be significantly less than accountancy fees,
• Provide insurances within the Umbrella solution (typically)
• Reduce your responsibilities on numerous levels, e.g. no Director responsibilities such as tax returns, submission of accounts – your Umbrella provider will take care of all this by making all deductions and returns to HMRC at the source.
• Provide choice, and flexibility as a result of an over-arching agreement.
Value for money will be a determining factor, particularly for those operating across both Public and Private Sectors – no doubt this will involve a combination of projects caught (or not) by IR35. Truly, this is where the value of operating a PSC needs to be considered whilst at the same time ensuring every project or assignment is robustly assessed. More than ever, the importance of diligent IR35 assessment has to be paramount and front of mind.
The migration from Ltd Co/PSC. to Umbrella is simple and painless – and you can act now, with no detrimental impact (albeit you need to ensure you do ultimately close your company down properly to ensure no future fines). One point to consider is to understand if this change in contract incurs a charge from your agency – this will no doubt prompt further questions on who you engage to source your assignments.
Identifying and selecting a reputable, credible and compliant Umbrella provider is critical. Whilst net pay shouldn’t differ hugely across providers, Umbrella companies will differentiate on two points;
• Service
• Margin Charged
Stay clear of “schemes”, new, unheard of, and unproven solutions, beware of Offshore providers and other quirks such as offering payments by way of a loan.
Whilst the changes coming into effect have the biggest impact on contractors within the Public Sector, it would remiss not to acknowledge those contractors operating within the Private Sector. With the changes to Public Sector contracting, it’s likely that competition for roles will become increasingly competitive given the potential migration of workers and skills from the Public to the Private space.
Workers in the Private Sector can continue to operate as a Ltd Co and/or PSC (IR35 status determination remains with the individual contractor, and should be reviewed regularly to ensure compliance with legislation with appropriate taxes being accounted for), it’s inevitable that legislation will affect the Private Sector – certainly worth keeping abreast of the impact of legislative changes to the Public Sector and keeping a close eye on the market to ensure those operating in the Private Sector stay informed and ahead of the curve.
Whether contracting solely in the Public Sector or a mix between Public and Private Sectors, talk to us on 01252 863700 and discuss your options. Allow ePayMe to help inform your view – at least provide you with a comprehensive list of points to consider. As referenced earlier, providers of Umbrella solutions can only differentiate in two ways – the service you will receive from ePayMe is unrivalled.