Umbrella Company IR35
Understanding IR35 – What It Means for Contractors and Employers
IR35 is tax legislation designed to identify individuals who are working as employees in practice but operate through intermediaries such as limited companies to avoid being taxed as such. The rules aim to ensure that workers who would be considered employees if not for their intermediary are taxed appropriately, in line with PAYE (Pay As You Earn) regulations. This is often referred to as "off-payroll working" or "disguised employment", where individuals provide services to clients through a personal service company but, in reality, function like regular employees of the client organisation. At Clearpath Umbrella, we help contractors and businesses navigate IR35 confidently and compliantly.
What Is IR35 and How Does It Affect You?
IR35 is UK tax legislation designed to ensure that individuals who provide their services to clients through an intermediary—such as a limited company or umbrella company—pay the correct amount of tax. It targets situations where, if the intermediary didn’t exist, the worker would otherwise be considered an employee of the client. These off-payroll workers are not paid through the client’s payroll but through their own intermediary. As a result, their Income Tax and National Insurance Contributions (NICs) are handled differently compared to employees hired directly by the company. At Clearpath Umbrella, we help contractors and clients understand their obligations under IR35 and remain compliant with HMRC regulations.
The Origins of IR35: Why It Was Introduced
IR35 was introduced by the UK government in 2000 to address the issue of ‘disguised employment’—situations where individuals work as if they are employees but operate through intermediaries like limited companies to reduce their tax liabilities.
Before IR35, many self-employed professionals provided their services through personal limited companies, allowing them to take a large portion of their income as dividends. This approach significantly reduced their liability for Income Tax and National Insurance Contributions (NICs), compared to if they were employed directly by a client.
At the time, there were no clear regulations enabling HMRC to challenge these arrangements, leading to widespread tax avoidance. The introduction of IR35 aimed to close this loophole and ensure that individuals working in an employment-like manner pay the appropriate tax—just as a regular employee would.
How Does Clearpath Umbrella Help?
At Clearpath Umbrella, we provide a seamless and compliant solution for contractors working under IR35 or those seeking hassle-free payroll management.
Here’s how we support you:
IR35 Compliance: We ensure that your working arrangements are aligned with current HMRC regulations, helping you avoid unnecessary tax liabilities.
Simplified Payroll: You get paid accurately and on time, with all Income Tax and National Insurance Contributions (NICs) handled for you.
No Admin Burden: We take care of the paperwork, deductions, and submissions—so you can focus on your work without the stress of managing finances.
Employment Benefits: As an umbrella employee, you may be entitled to statutory benefits such as sick pay, holiday pay, and pension contributions.
Transparent Fees: No hidden charges—just clear, honest pricing.
Who Needs to Be Aware of IR35 Rules?
The off-payroll working rules, commonly referred to as IR35, may apply to you if:
You are responsible for hiring workers—such as operating through a recruitment agency—who then provide their services to public sector clients via an intermediary.
You deliver services to a client through your own limited company or umbrella company.
You carry out work through a partnership, another individual, or a personal service company (PSC).
Understanding and complying with these rules is essential to avoid unexpected tax liabilities.
At Clearpath Umbrella, we support both contractors and recruiters by ensuring full IR35 compliance. We simplify the process, reduce risk, and help save valuable time and money.
Get in touch with Clearpath Umbrella today to learn how we can support you with compliant, stress-free contracting solutions.