It was recently revealed that nearly one out of every two contractors working in the UK use either a recruitment agency, an umbrella service company, or some other form of personal service company, according to a survey from FPS Group.
A full 48 per cent of freelancers make use of some sort of personal service company, according to the survey, but there are new fears arising that new legislative changes going into effect this coming April could have a negative affect on their use. Some feel that this new legislation would hamstring these service companies to the point where they would be useless thanks to a desire on the part of the government to make sure that ‘controlling persons’ that are employed through these companies are treated the same as regular employees for the purposes of taxation and NI payments by putting them on company payrolls; this could effectively cripple the private sector , where 53 per cent of all interim assignments completed in 2012’s first quarter were completed by umbrella service contractors, according to data from the Interim Management Association.
The relationship between clients and agencies could be damaged – and perhaps irreparably – by the new proposals, according to a tax partner at Deloitte who reviewed the consultation document issued by the Government. Only around 34 per cent of survey respondents said they planned to use PAYE instead of an umbrella company in their next interim position, but these figures could change – and quite drastically – if the government has its way.
More than 52% of those surveyed plan to be payrolled using some form of PSC solution in their next role, with only 34% intending to use PAYE. However, if the government has its way these figures could well change.
