Risks presented by umbrella companies

Umbrella companies initially developed in the early part of the 21st century partly in response to the implementation of the intermediaries’ legislation (IR35) in 2000. They provide a way for businesses to source workers they did not want to hire permanently while the worker becomes an employee of the umbrella with the (then) added attraction of the ability to claim travel and subsistence expenses compared to the rules governing traditional temporary labour agency engagement. Tax-free travel and subsistence could be claimed even between home and their placement site provided the expectation was that placement did not exceed 24 months. In effect the workers were engaged for defined contract periods but with an overarching (umbrella) contract with the umbrella company.

Over time the role of the umbrella company has evolved ...