New to I.T. contracting...please help!!

[Neil72uk]

I have recently applied for a 2 month contract online using an agency that specialises in I.T recruitment. The agency got back to me and explained that I would have to contact some 'Umbrella' companies and register with them...I understand this involves paying them a fee and that they take care of tax, NI deductions, etc

I've done lots of temp work before where the agency pays you directly. Is there any particular reason why this agency would refer me to one of these umbrella companies? I haven't come across this before so any help would be most appreciated. Why don't they just pay me directly like any other agency would?

Sorry to be so naive!

Thanks

Neil

[Loosehead]

They can't unless they have there own umbrella co or the tax man will nail them to the wall. Essentially this is mostly about IR35. You can if you like have your own company but that is now not really worth the bother becaue of IR35 so the best solution is the umbrella co.

Essentially IR35 was used to stop (mainly IT) contractors from constructing their affairs to avoid NI, basically you could pay yourself a salary of about 8k a year and the rest in dividends, this meant that you avoided NI. Gordon didn't like that so being the "party of small business" he promptly shafted 60,000 small businesses!

[Neil72uk]

Thanks for the reply.

So, is it a case of the agency saying that they would rather someone else deal with the potentially tricky area of contractors and tax, etc?

If so, then that would explain why the consultant gave me some contact details for umbrella companies and asked me to 'shop around' for the best deal.

[Catso]

As you surmise, the agencies don't want to get involved in payroll issues. They just want to pay another business (be it an umbrella or your own) a simple, gross payment for 'services rendered'. It saves them a load of extra hassle and costs by not doing the payroll functions.

[Loosehead]

Although you can set up your own limited co, the accepted route of least hassle is now the Umbrella route. Some of them claim to be able to avoid IR35 and can insure against it! I know several people who use these, I have'nt heard heard of any problems:
www.giantgroup.com

[Neil72uk]

Thanks again to you both for your replies. Much appreciated!

Cheers

Neil