Employers face steep National Insurance charges and obligations under labour laws if they retain a contractor and the contractor is subsequently deemed to have become an employee. Consequently, it became commonplace in the 1990’s to hire contractors through personal service companies, umbrella companies and the like.
Some service providers to contactors simply acted as a back office, collecting payments from the user of the contractor’s services and passing this on to the contractor net of their fees.
But others differentiated themselves by offering tax efficient incentives such as loans and benefits. These were att...