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UK Umbrella Companies have been on a continuous trajectory of very low to very high regulation over the past decade. The old composite company business model is no longer possible after the Managed Service Company legislation 2007 (which also put recruitment agents firmly in the chain of liability if their suppliers were non-compliant). Tier 2 visas are not possible (because one of the main pre-requisites for a tier 2 licence is that the sponsor of the visa must control the worker directly) and therefore they cannot employ non-EEA nationals.

From April 2014, HMRC introduced a stronger and more coherent version of what was previously known as the agency legislation. It is now necessary for the agency (or the intermediary closest to the End User Client) to apply PAYE and NIC in all cases where the personnel supplied are:

  • Subject to control, direction and supervision
  • Providing the services personally or responsible for the provision of the services
  • Remunerated as a direct consequence of the provision of the services and
  • Receiving remuneration not already taxed as employment income

Recruitment agencies who supply contractors to no income tax countries (e.g. Dubai, Abu Dhabi or Saudi Arabia) or to low income tax countries (e.g. many countries in South East Asia or perhaps Russia) often sell the deal to candidates on the basis of the tax free income or low tax income that they can generate if they work there.

Benjamin Franklin said that the only certainties in life are death and taxes. Any Compliance Manager in a UK based Recruitment Agency will tell you that as they go to work each morning, there is one more certainty: they will be asked by a sales consultant what do they say to a contractor who wants to work in France/Germany/Belgium using his own UK Limited Company. The number of variations and angles on this particular theme seem to be almost infinite.

The standard objections that seem to come back from contractors who do not initially get their own way on this matter tend to be:

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