Umbrella company

Recruitment agencies prefer to issue contracts to a limited company to reduce their own liability.

According to criteria set out by the UK Department for Business, Innovation & Skills, there are an estimated 4 million temporary workers in the UK, of whom 1.56 million are "classed as being in a management or senior official role, a professional occupation or an associate professional and technical occupation."

It is estimated that 14% of the UK's professional contractors are currently managing their business by working through an umbrella company.

[2] An umbrella company processes timesheets received from the employee/contractor, then issues an invoice to the client for payment.

Most agencies elect to utilize an umbrella company, which provides additional benefits to the contractor.

HMT decided that the legislation would remain as is but suggested additional HMRC policing would be carried out to reduce cases of non-compliance.

Supervision, Direction and Control (SDC) came into effect on 6 April 2016 as a way of limiting the number of umbrella contractors being able to claim travel and subsistence expenses.