Contractors' Questions: Why's my agency want me to move umbrella?

Contractor’s Question: It hasn’t reached me yet, but I’m apparently going to receive a strongly worded ‘request’ from my recruitment agency to change the umbrella company I use. Some whispers are that a new rule is behind this request incoming to a few brolly contractors on my agency’s books. Any light shed appreciated.  

Expert’s Answer: Recruitment agencies revisit their PSLs periodically and a business-related issue may make ‘your’ brolly lose out over theirs, or their brolly going forward. 

However, there is a reason why your question has been posed to us a few times in recent weeks, and contractors are asking why recruiters may be less willing to deviate from their PSL.

The Criminal Finance Act now makes it easier to convict recruiters who recommend non-compliant suppliers. If your umbrella company were to help you evade taxes, the agency would now be at risk of criminal prosecution. And crucially, even if your umbrella is completely compliant, if they don’t have the ‘right’ accreditation in the eyes of the agency, then the agency may not be willing to take the risk.

In fact, we know of several leading recruiters that, due to the act passing into law on September 30th, now require suppliers to be FCSA Accredited Members, or be accredited by Professional Passport.

However, if you’re sure your current umbrella company is compliant, and let’s say you want to stay because you’ve had a positive experience with them, it might be worth finding out why your new agency us unwilling to work with them.

Remember though, the agency (and indeed any business), is allowed to choose which companies they do business with! Ultimately, if they can’t be persuaded to work with your preferred umbrella, your choice is to accept this or move on to another contract.

If or when you do, consider that compliant umbrella companies all operate under the same rules, and will therefore pay roughly the same amount for any given contract. Significantly higher net pay is a warning sign that your umbrella is not the one you want to be with if a HMRC inspector calls!

The expert was Graham Fisher, the chief executive of contractor accountants Orange Genie.

Wednesday 4th Oct 2017
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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