T&S reform is not the end of umbrella

Julia Kermode

Unsure of the impact of travel and subsistence (T&S) reform? Confused about the future of umbrella? Julia Kermode dispels some of the myths and sets the record straight.

Firstly, it should be emphasised that T&S reform is not the end of umbrella. Why? Simple; the 400,000 contractors currently working through an umbrella are not suddenly all going to become permanent employees for two reasons – firstly there aren’t the vacancies to be filled, and secondly, many do not want permanent roles. Neither is it likely agencies will provide an in-house service instead, as this would mean significant changes to your business.

A fully compliant umbrella employer manages the commercial, employment, taxation, and statutory risks associated with the use of temporary workers for the supply chain. This minimises your overheads, your employment risk and your administrative burden of managing temporary workers, freeing you up to get on with what you do best.

I firmly believe that umbrella will continue in some form even if T&S reform removes this tax relief from most contractors. There is a reason why umbrellas evolved in the first instance, and contrary to popular myth this was not about wholesale exploitation of tax relief. Moreover it was borne to fill a need for contractors to have their admin centralised and for agencies/clients to outsource the management of their contractor staff to specialists.

So what will happen in the event that T&S relief disappears? It is likely that some firms with business models that are too reliant on this aspect of their business will experience difficulty. However the firms that are providing the full range of benefits are less likely to be hit as hard, because their business model has been built around a variety of factors.

There are undoubtedly some firms out there scaremongering and suggesting that their way is future-proof, which indeed it might be – but be cautious because until we see the exact nature of any legislative change there are no guarantees that a particular approach is future-proof.

The Autumn Statement on November 25th should provide some answers on what the future looks like, but in the meantime it is simply conjecture. So by all means explore what the market has to offer, but caution should be taken against a kneejerk reaction.

What can you do in the meantime to protect yourselves? Talk to your preferred suppliers about the potential changes, discuss the options and make sure they are prepared. It is important to work with partners that you trust. Be wary of firms that seem to be aggressively cashing in on the uncertainty. Don’t make snap decisions, trust your instincts and if something looks or feels too good to be true then it probably is.

Julia Kermode is chief executive of the Freelancer and Contractor Services Association (FCSA).