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An Umbrella Company is your Back-Office

Umbrella companies act as a contractor's back-office administration team. An umbrella company relieves a contractor from the burden of form filling, dealing with HMRC and understanding complex and ever changing legislation. Contractors no longer have to spend hours in front of their computer after a long days work.

Good umbrella companies only charge when you are working and do not have a joining fee or leaving fee. There are no long term commitments for the contractor, and come with key insurances included within the cost. Many umbrella companies offer a website portal so you can access your account details at your convenience.

Contractors working through an umbrella company have very little paperwork to do themselves. They get answers to any work related questions either by phone or email from their umbrella company. The majority of umbrella companies are very good when it comes to customer service and value your business highly.

 

Why use an Umbrella Company?

When you register with an umbrella company you get:

Limited company status
A payroll service
Expert advice on the business expenses you can claim to reduce your tax
Statutory benefits such as sick pay and holiday pay
An invoicing and money collection service

Instead of having to manage your own limited company with all the bother and cost, which that entails, or using your recruitment agency payroll (not tax efficient) an umbrella company provides a hassle free payroll mechanism which you can use as and when needed. It doesn't matter whether you pet paid weekly, monthly or only very occasionally.

Umbrella companies have hundreds and sometimes thousands of customers. An umbrella company will only charge you each time they run your PAYE payroll.

The average charge for an umbrella company service is around £25 which is deducted from your pay so you don't actually have to send them any money.

 

Brief History of the Umbrella Company

The government introduced a law called ‘IR35' in 2000. This meant it was financially less beneficial for contractors to work through their own limited company. Contractors wanted a more efficient means of getting paid without having to do all the hard work themselves.

Umbrella companies are officially recognised by HMRC and considered a legally compliant way for contractors to get limited company status and be payrolled. Contractors don't have to worry about calculating their tax and National Insurance, yet still benefit from certain allowable business expenses which reduce their tax.

 

Contemporary Umbrella Companies

Today there are several hundred umbrella companies a contractor can choose from. Around 350,000 contractors use umbrella companies because of their

Convenience
Ease of use
Reasonable prices
Efficiency
Speed
Increased take home pay

Contractors also like umbrella companies because there are no long term commitments and the minimal amount of work required. Recruitment agencies prefer their contractors to use umbrella companies because it reduces their own administration drastically and so increases their efficiency.

 

Choosing your Umbrella Company

Contractors need to choose their umbrella company carefully, stresses Emma Hainsworth, MD, Simplify Umbrella:

"It's important for a contractor to choose an umbrella company that suits their needs, is professional and always puts its customers first. It is also critical that the umbrella company pays its contractors quickly, accurately and its fees are reasonable.

Hainesworth continues:

"Simplify Umbrella is fully compliant with all the latest legislation and so protects contractors from unnecessary HMRC investigation. Our charges are one of the lowest in the market today, yet we still offer all the services a contractor would need."

There's no mystery to umbrella companies, which are a straightforward solution to an otherwise complex process - such as running your own limited company. Umbrella companies can save you money and leave you to get on with the important things in life knowing all your financial affairs are in good hands.

 

Visitors who read this article went on to read these articles:

1. Over 70,000 contract roles throughout the UK
2. Calling an umbrella company for the first time
3. Your responsibilities when using an umbrella company
4. Should a contractor run their own limited company or use an umbrella company?
5. Help! I have to register with an umbrella company

 

 

written on2010-08-21 23:57:06

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