Under an umbrella

THE RECENT DECISION of the Court of Appeal in the Arctic Systems settlement case( Jones v Garnett (re Arctic Systems Ltd) [2005] EWCA Civ 1553) has again focused attention on service companies. While the unanimous decision of the three appeal court judges will have encouraged spouses who operate via a family service company the case is of less comfort to users of another variant of service company — the composite company (composites) also often known as an 'umbrella' company.

This article looks at the background to composites their typical structure and some of the tax and operating issues they face including how the Arctic Systems decision may or may not affect contractors working through composite companies.

Composites — background

Composites are unusual. They bring together strangers as shareholders and employees in a multi-user service company. The worker/shareholders are the only employees. In this article I...