IR35 is a contentious subject. For many recruiters, it has caused headaches over what responsibility and liability they have over the contractors they supply and the tax these hires have.
With many clients opting for the supply chain, i.e. the recruitment agency or umbrella firm to take on the status of ‘fee-payer’ - the party responsible for paying the contract hire’s intermediary - it is often agencies that become responsible.
As a result, there have been instances of public sector hirers enacting a ban on contractors that operate through a PSC. Alternatively, agencies and employers have been making blanket decisions on contractor tax status in order to ensure they don’t get hit with a tax bill. However, this often doesn’t take individual circumstance into account.
Under these changes, many contractors are using umbrella companies to provide them employment-style benefits.