FAQ

What are the main steps I should take before working inside IR35?

Unfortunately there are quite a few steps you should take to protect yourself before taking a contract inside IR35. We've detailed them in Starting Work Inside I35.

What are the main risks with working inside IR35?

Aside from the lack of any employment protections, there are several risks to working inside IR35. We've written them up in Inside IR35 - the Risks.

What can an Umbrella deduct from my pay?

Umbrellas can deduct:

Employees income tax
Employees National Insurance
Umbrella fees (ie. their own fee for running the service)
Pension (if you want them to)

They cannot directly deduct:

Employers income tax
Employers National Insurance
Apprenticeship levy

The things they cannot deduct still have to be paid from somewhere. The umbrella should be "uplifting" your rate to accommodate these things. For example, if your rate is £200/day, they should actually be collecting (say) £300/day and then can deduct the employers taxes and other things from it.

In short - you need to make sure your umbrella is "uplifting" your rate and then deducting more from it. Deducting employers taxes from the rate you agreed to work at is illegal.

There are more explanations here:

What is the "Assignment Rate"?

There is no legal definition of "assignment rate" - it's a term made up by the recruitment industry to make Inside IR35 roles look more attractive than they really are. It's an added layer of confusion to Inside IR35 roles which workers will need to understand before accepting a role.

You will not get to keep the assignment rate. There are lots of deductions from it, but what those deductions are is not standardised or in most cases made clear during the recruitment process. As a potential Inside IR35 worker, you must ask (at least) these questions about the assignment rate before accepting:

Who pays the Employers PAYE contribution?
Who pays the Employers NICs?
Who pays the Apprenticeship Levy?
Who pays pension contributions?
Who pays the umbrella margin?
What happens with holiday pay?

You should ask for a Key Information Document (KID) which should show how the Assignment Rate is spent before giving you the taxed money at the end, and how holiday pay should be dealt with.

The Freelance Informer has a good article covering the 'assignment rate' and what to ask before taking an Inside-IR35 role: https://www.freelanceinformer.com/news/ir35/assignment-rate-unravelled-questions-to-ask-before-you-accept-an-off-payroll-job/'

Do I get Holiday Pay, even as an Inside IR35 Contractor?

Yes! Holiday pay always factors into an Inside IR35 role. However, there are two types:

Accrued. You build up holiday 'time' during your assignment. You can take those hours/days off and get paid for them, or else your umbrella company can pay you extra for that time instead.
Rolled up. Your day rate includes a small extra amount which is the holiday pay. If you take any time off, you don't get paid for it, and you won't get any additional payment for holiday pay. There should be a specific line item covering this on your Key Information Document (KID) and payslip.

Recent tribunals have determined that any accrued holiday pay that was not paid in the past is still due now (so check any old umbrella/agency contracts and payslips). Despite this, Umbrellas may state that you must use holiday time before a certain date (or "lose" it). Since holiday time may not be convenient for the client (or you), this can lead to problems which can be hard to resolve.

In most cases, 'rolled up' is probably the way to go if you can. It means that every time you get paid you're fully "up to date" and nothing else is owed to you or by you, but it's a choice for each contractor to make for themselves.

Official HMRC guidance is here: https://www.gov.uk/government/publications/simplifying-holiday-entitlement-and-holiday-pay-calculations/holiday-pay-and-entitlement-reforms-from-1-january-2024 - although we'd generally advise some caution with assuming HMRC guidance is always factually correct.

My umbrella says they're "accredited", does that mean they're okay?

Unfortunately, accreditation does not guarantee anything. However, if the accrediting body has done some thorough checks, then this can give you some additional comfort when performing your own due diligence. In truth though, relying on accreditation really means you need to do due diligence on the accrediting organisation as well as the umbrella concerned.

There have been some well covered cases of umbrellas accredited by a "leading" organisation undertaking some of the common "scams" (such as withholding holiday pay). Even the best looking accreditation may be worth nothing.

See https://www.bbc.co.uk/programmes/m000tcl7 (don't be fooled by the name of the programme, it's in there - via Contractor Calculator). There are lots of other places to look too:

My umbrella says they're "compliant", does that mean they're okay?

Unfortunately, this doesn't really mean anything at all. Even the disreputable umbrellas say they're "compliant". You need to do due diligence to work out if your umbrella is good or bad.

What sort of scams do some Umbrella companies run?

There are a variety of scams run by unscrupulous Umbrella companies. These range from simply failing to pay HMRC the tax they've deducted from you, to deliberately doing the maths wrong on your payslip so they can deduct more than they should to paying you via loan schemes.

InniAccounts have a nice write up of the main scams in Umbrella Companies: Common Skims, Scams and Unethical Practices.

I'm looking to hire some people, should I make the roles inside or outside IR35?

This is a big question and mainly comes down to how you want those people to work for you. If you intend to treat them roughly the same as your employees, then either hire them as employees, on a Fixed Term Contract or as inside IR35.

If you're looking to have these people work on a specific set of tasks or projects and don't want to manage them closely, you may be able to structure the work to fall outside IR35. You should consult a specialist on this subject though, because HMRC take a dim view of anyone trying to make a role or contract look like it's outside IR35 when the realities of working practices make it inside IR35.

Can I make my workers use a specific umbrella?

Yes you can, but choose your umbrella carefully. If they commit fraud, you can end up liable for it (see below). You should do due diligence, and like contractors themselves should keep a constant watch over your chosen umbrella companies to make sure they are working correctly.

The Criminal Finance Act 2017 says that it only needs to be shown that you didn't have reasonable procedures in place to stop fraud for you to be guilty of it. Therefore, recommending a (fraudulent) umbrella puts you at significant risk.

Also note that if you have a Preferred Supplier List (PSL) of umbrellas, those companies may start to charge your contractors more than the advertised rates because they know they have a "captive audience". This may affect your ability to retain contractors.

Can you recommend an umbrella or agency?

We do not recommend any agencies or umbrellas. We therefore avoid any issues of impartiality, but also avoid any liability issues should any of our recommendations turn out to be less than perfect.

You should do your own due diligence when selecting an agency or umbrella, and should keep a constant watch on their behaviour to ensure nothing goes wrong at any time.

Can you recommend someone to help me with my tax or employment contract?

We don't recommend professionals for tax or legal services. We suggest you do your own research to find suitable people to help you.

Can I just opt-out and work outside IR35 instead of using an umbrella?

No, sadly it doesn't work like that. Once a role (or job, gig, etc) is determined to be "inside IR35", then you can only work through an umbrella or agency for it.

If the hirer makes some changes, they may be able to re-asses a role as being outside IR35, but this requires some significant effort on their part. As a general rule, if it's inside IR35, then it'll probably stay that way.

Can I use this site as legal advice?

Sadly, no you can't. For that, you should consult with a proper legal progessional.

Do you guys just hate umbrellas?

Not at all - they provide a useful and valuable service. We very much take issue with those that are disreputable because they make working inside IR35 considerably more difficult and make it harder for the good umbrellas to operate successfully. There's a bit more on this subject at About Umbrellas.

Is this site trying to sell me something?

No! We're just here to ensure everyone who works inside IR35 knows what they're getting into and don't fall foul of the various risks involved.

There's a mistake on your site, can you fix it?

If we've said something factually incorrect, or have made a mistake or were just unclear or incomplete about something, we'd like the opportunity to fix it. Please contact us and let us know what the problem is.