Will the furore around BBC "contractors" affect Umbrella Company Contractors?

26 July 2012

Could the recent scandal regarding people working for BBC (including many famous faces) being paid through a 3rd party (i.e. off payroll) going to affect umbrella company workers?

The answer is probably YES!

It definitely seems a hot topic that any vehicle where people potentially pay less tax than others is going to come under Government scrutiny.

Out of all the solutions working through an Umbrella Company does result in the contractor being paid after deduction of PAYE and National Insurance and is therefore possibly the Governments favoured option for contractors. It does however mean potentially less tax is paid than being paid by PAYE by the recruitment agency.

With an Umbrella Company a contractor (who becomes an employee of the umbrella company) can save tax by being reimbursed for costs they incur travelling to a temporary assignment tax free. They can also be reimbursed for food and drink while working away plus any additional accommodation costs. This in reality is the same as any employee where an employer sends them to different locations to fulfil an assignment.

Contractors however can pay considerably less tax when working through their own limited company or personal service company (PSC).

If you are a contractor worried about tax and which is your most suitable option, please call PayMatters on 0800 121 6513.