Will agencies still need umbrella companies after April 2016 – Most definitely YES, would be ePayMe’s answer……read on…..
As of April 2016, many contractors working through umbrella companies will find it very difficult indeed to claim tax relief on their travel and subsistence expenses, yet, despite many suggesting that this will be the end of the umbrella company, we must not forget the vital role the umbrella company plays, in that they are crucial in supporting the flexible workforce, that plays a major role in the success and growth of the economy in the UK.
So, with this in mind, what will the benefits to workers be, if they will be unable to claim tax relief on their travel and subsistence claims from April 2016?
The answer is many, as tax relief is not the only benefit that makes an umbrella company an eye-catching option for a contractor. From a contractors view, the umbrella company provides them with full employment rights, seeing as the umbrella company becomes their employer and they become an employee of that umbrella company.
Full employment rights include all statutory benefits, i.e. holiday pay, maternity and sick pay etc. that as a result, necessitates a responsibility for the umbrella company to provide Statutory and HR services to its contractors.
And what now for agencies, if all of a sudden the estimated 450,000 workers who are currently providing their services through umbrella companies, will they suddenly be taken on to the agencies and clients books after April 2016? The answer to this is simple ‘NO’, as by going through an umbrella company, they provide protection against potential liabilities being passed up the supply chain, by assuring that their workers Tax and National Insurance affairs are in order and paid correctly.
Also, by having employment rights mean that the umbrella company is taking responsibility for having a large workforce away from the agency, thus removing the high costs involved with employing such a large freelance workforce.
In line with employment rights, comes the potential for HR issues and if an agency is running a large workforce and there are problems with grievance and disciplinary issues, this will undoubtedly take up a large amount of time, yet this would be removed away from the agency and down to the umbrella company to manage.
Notwithstanding the above, there would appear to be numerous payroll providers claiming to provide ‘solutions’ that will allow workers to continue to claim tax relief on their expenses after April 2016, who will happily talk to you about them, upon signing a Non-Disclosure Agreement and should you be approached by and offered these so called ‘magical solutions’, we urge you to tread very carefully indeed.
For information on our range of products to help you move forward post April 2016, please contact our Sales Team on 01252 863 700, who will be happy to assist and advise you.