Do your due diligence for new IR35 off-payroll rules urges FCSA CEO

Recruitment agencies are warned to re-examine their preferred supplier lists of umbrella companies and “do your due diligence” as the new IR35 Off-Payroll rules come into force in less than a month, the CEO of the Freelancer and Contractor Services Association (FCSA) has urged.

Speaking to Recruiter, Phil Pluck said the FCSA has recently received “an avalanche of unlawful companies trying to get into our membership” before the new rules around contractors working in the private sector take hold. 

The new rules apply to contractors working with medium or large-sized organisations in the private and third sectors. Under the changes, responsibility for operating the off-payroll working rules will shift from the individual’s personal services company (PSC), to the organisation or business that the individual is supplying their services to. This includes responsibility for deciding whether the rules should apply and deducting the associated employment taxes and National Insurance Contributions.

The FCSA vets umbrella companies to ensure their solutions are legally compliant before admitting them into membership. Pluck said that the average time from applying for membership in the FCSA to acceptance or rejection is three to five months. “That’s how long it takes us to check,” he said.

In the last weeks before the legislation is implemented, Pluck advised that agencies and contractors “just do one more check on Companies House” to see if the company or companies they are working with has “lots of directors or a huge amount of change in the numbers of directors or if a director comes up on numerous umbrella companies. Again, be very careful”. 

Pluck said he had learned last week of an organisation with 69,000 umbrella companies within its system.

“Ask the awkward questions” of umbrella companies trying to secure the contractor’s business or join an agency’s PSL, Pluck urged.

“These people have vast amounts of money, partly because they’re using taxes that should have been paid to HMRC as part of their profits, and that allows them to fund large websites, very slick, and very slick systems that move people around within them without their knowing. 

“So,” he said, “I would just say, agencies and contractors, do your due diligence.”

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