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Research shows IR35 may increase use of umbrella companies

The latest study published by the Association of Professional Staffing Companies (APSCo) shows that most recruitment firms expect the private sector IR35 reforms to lead to greater use of umbrella companies.

The introduction of the IR35 changes for contractors within the private sector will come into effect on April 6th 2020 and 91 percent of those recruitment companies surveyed for the APSCo study stated that they expect a lot of contractors to opt for umbrella companies in place of personal service ones once the reforms are rolled out.

Many of these recruitment firms were also doubtful about the likelihood of freelance contract workers being willing to carry out work within the new boundaries of IR35 once the reforms become reality. The study showed that 67 percent of them felt that this would not happen.

That viewpoint is supported by a previous study that APSCo carried out looking at what has happened since the IR35 rules for public sector workers were changed. This revealed that more than 50 percent of recruitment firms had experienced contractors switching to using umbrella firms instead of personal service companies. Many private sector contractors will likely be getting advice from tax return accountants on what to do ahead of next April.

Samantha Hurley from APSCo said that she did not find the results of the study particularly surprising, as both employers and contractors would want to avoid being caught by the IR35 reforms, but warned against umbrella companies that would try to exploit this.

Posted by Mark
July 29, 2019

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