Umbrella Employment and What IR35 Means For You

Contracting can be a complicated sphere to navigate. With options such as Umbrella, Limited Company, and Sole Trader, it can be difficult to know which avenue to choose and how you’ll be impacted by legislation such as IR35. But don’t worry, it’s not as complicated as it sounds. Umbrella working is a great option for anyone who want to continue working flexibly despite IR35, says James Harris, Head of Compliance at Workwell.

A quick summary of IR35

IR35 refers to tax legislation that was introduced in 2000 to tackle tax avoidance by workers who were working under ‘disguised employment’ schemes. Disguised employment is defined as an individual who is supplying their personal services to their clients through an intermediary, such as their Limited Company, but who would be considered an employee if the intermediary wasn’t used.

On 6th April 2021, IR35 reforms were implemented by HMRC in the private sector. They have meant that end hirers in the private sector (unless they’re considered small by HMRC) are now responsible for determining the assignment status of their contractors and issuing a status determination statement.

If you receive an ‘outside’ SDS, you can continue to work as a Limited Company contractor and enjoy the same benefits of self-employment as before. However, if you receive an ‘inside’ SDS, you may need to consider other working options, such as Umbrella employment.