According to recent figures revealed in HMRC accounts, the majority of temporary workers engaged by the UK’s tax body are contractors working via umbrella companies. Accounts for the year to the end of March 2021 show that, of the 403 temporary workers engaged in the previous year, just 15 were deemed to be working “inside IR35”, meaning that they worked via a limited company while paying tax and National Insurance.
Aside from these workers, the vast majority of the 388 remaining temporary workers were contractors working through umbrella companies. The tax authority refused to disclose the exact number of “outside IR35” temporary limited company workers it was engaging, but confirmed it was a low enough figure to risk identifying individuals if it were disclosed.
The fact that the majority of its temporary workers were “inside IR35” contractors working through umbrella companies has led some to suggest that HMRC may have implemented a partial ban on hiring “outside IR35” contractors. However, HMRC has denied having such a ban in place.
As a public sector body, IR35 rules have applied to HMRC since 2017, meaning that, since that time, the tax authority has had ultimate responsibility for determining the working status of any contractors that it engages. Given the complexity surrounding IR35 rules, numerous public sector organisations have sought to avoid using “outside IR35” workers.
Contractors working through umbrella companies are classed as their employees, meaning that IR35 legislation doesn’t apply. As a result, many public sector bodies have a policy of only engaging umbrella company contractors, a practice that has been taken on more widely since IR35 rules were introduced for private sector businesses in April 2021.
Author: Steven English
24.12.2021
