1. The doomsayers were wrong

Prior to 6th April, commentators were queuing up to predict the demise of umbrella employment as we know it. As it turns out, most umbrellas have yet again demonstrated their adaptability. Never mind surviving – many are thriving.  At ADVANCE, for example, demand for our umbrella solution from contractors and recruitment businesses has never been stronger. We recently enjoyed a record week in terms of the number of umbrella contractors paid and employed in a single week. 

2. SDC is key

Here at ADVANCE our experience in ‘supervision, direction or control’ dates back to 2014, when SDC became the key test in the self-employment arena. As of 6th April, SDC is of course also the key test for determining an umbrella contractor’s eligibility for home-to-work travel and subsistence (T&S) expenses. The difference now is that the risk sits with umbrella providers and their directors. ADVANCE’s expertise in SDC means we are confident in our ability to apply the new rules correctly. We are happy to bear liability as dictated by the legislation.  That’s why, subject to an assessment of their SDC status, a contractor employed on our umbrella solution will still be able to claim home-to-work T&S expenses.

3. But it’s not all about T&S

Often overlooked amid the hullabaloo over T&S, the salary sacrifice changes are equally significant. In a nutshell, the reforms mean employers are no longer able to pay expenses free of tax and NICs when the level of reimbursement affects the employee’s general earnings. In the new era, any subsistence expenses (assuming the umbrella employee is eligible) must be fixed at the start of each assignment according to HMRC scale rates. Mileage expenses, however, fall outside the new salary sacrifice rules. This means that contractors employed on our umbrella solution are, subject to their SDC status, still able to claim variable home-to-work mileage expenses and be reimbursed directly for these. Meanwhile, food, accommodation and non-mileage travel expenses are captured. We will fix these expenses at the start of a contractor’s assignment.   

4. Some providers have responded quicker than others

Whilst reports of the demise of the umbrella company model have been greatly exaggerated, it’s certainly true that some contractor services providers have been quicker out of the blocks than others when it comes to adapting to the new legislative landscape. At ADVANCE we have now made several thousand payments to contractors employed on our umbrella-with-expenses solution.

5. Confusion still exists

It’s clear that some umbrella providers are still misinforming both contractors and recruitment businesses as to the practical effects and implications of the recent legislation changes. This is to be expected, but it’s frustrating nevertheless. My advice to recruitment businesses would be to partner with an umbrella provider that can demonstrate a) a clear understanding of the legislation and b) experience of implementing a compliant and commercially viable solution.