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PRISM chief executive discusses umbrella companies and contracting on BBC’s Money Box

Crawford Temple, chief executive of PRISM, has spoken about the legislation for contractors working through umbrella companies on BBC’s Money Box programme.

The programme confronted a common misconception that contractors pay two types of national insurance - employer’s as well as employee’s NI.

Presenter Paul Lewis described a situation where a contractor engaged on a relatively low income through an umbrella company could end up paying more tax and national insurance than someone earning nearly £100,000 a year.

Temple explained that contractors only pay employee’s NI, in accordance with HMRC rules, while the umbrella companies pay the employer’s NI.

He told the programme on Saturday, “Because of the structure of the contracts, the money coming into the umbrellas effectively is the umbrellas’ money which allows them to make the deductions.”

PRISM says that contractors who choose not to be paid through PAYE by an agency are paid more to take account of the deductions the umbrella company must make, including employer’s NI.

Temple added, “It’s confusing and I think if there’s a takeaway for a contractor, it would be to ask your agency what the PAYE rate is and the limited company rate and what they will find is that most of the responsibly-run providers will then give them an illustration to show which one provides them the best route.

“We have been pressing the Government to carry out a strategic review because we don’t believe the tax system has kept pace with the modern business world and the engagement models that are in place.

“We’ve received quite wide party support on that. The legislation is becoming so complex an individual worker can’t understand it.”

PRISM secured the signatures of 55 Parliamentarians on an open letter calling on the Chancellor to launch a strategic review.

The proposal was then tabled as an amendment to the Finance Bill by the SNP after consultation with the PRISM. It is yet to face a vote in the Commons.

The not-for-profit trade body for employment intermediaries wants to see legislation evolve to take account of the flexible way millions of contractors choose to work outside the traditional modes of employed and self-employed workers.

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