Parasol warns of umbrella dangers
ContractorCalculator published an interesting interview with Rob Crossland of leading umbrella company Parasol.
Following the Parasol aquisition of accountancy firm Quay Accountingin the article Rob Crossland warns of further consolidation in theumbrella market as smaller players begin to suffer in worsening tradingconditions.
Rob also belives that smaller accountancy practices will do well,but that some firms affected by the Managed Service Company legislationwill find it difficult to maintain profitability and may exit themarket alll togeather.
Finally the article suggests that the current 100+ umbrella companies in the market will contract to a core of 30 strong firms.
Its an interesting viewpoint. In light of the aquisition of anaccountancy firm its clear that Parasol can see changes in the umbrellamarket, and also its possibly true that they can see a change inattitude of their clients who are wanting a Limited Company of theirown.
Why might there be a change in attitude of the traditional Umbrella client ?
My guess is the following:-
1. The current economic climate may mean contractors who saycontracting as a temporary solution to their career can now see that itmay be a long term solution.
2. There is still concern regarding the umbrella expenses, dispensations and potential HMRC changes.
3. There is concern regarding the stability of the umbrellacompanies in the current climate, ( after all - if you are with anumbrella company they have control over your contract income !)
Here at Blevins Franks we still think that in many cases, InsideIR35 or Outside IR35, running your own business is the preferably longterm solution for Professional Contractors and Freelancers.
Here are 5 good reasons to start with:-
1. Flat Rate VAT Scheme increases your net income.
2. There are more tax planning strategies you can use with your own company.
3. Its your company. You are in control of your money. No one can take your company off you or disappear with your money.
4. There is plenty of good systems you can use to easily manage your company.
5. Fees are often lower than an umbrella company ( ours start at £40 a month !)
If you are in an Umbrella Company or have colleagues that are, youmay want to consider what to do for your next contract. Its clear to ushere that many people are beginning to question if the traditionalumbrella company continues to offer the best solution.
We have a spreadsheet that enables you to compare Limited Companywith Umbrella Company, Partenrship, Sole Trader and Agency PAYE, allyou have to do is enter your expenses and contract rate. You candownload this free from our Business Library once you register on our website .