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Umbrella Company: Did You Know?

 

An umbrella company is a business which helps contractors (individuals working under temporary contracts):

Achieve limited company status

Turn their timesheets into cash

Calculate & pay taxes directly to HMRC on their behalf.

Contractors usually get their contracts through recruitment agencies, which specialise in temporary assignments and which have a list of the many clients who prefer to engage such workers rather than hire full time staff.

When a contractor (also referred to as a freelancer worker or temporary worker) uses an umbrella company they become an employee of that umbrella company which then takes care of all the paperwork involved in contracting.

 

Umbrella Company Duties

The umbrella company will sign the recruitment agency's contract(s) on behalf of the contractor, invoice the recruitment agency (or in some instances the client directly), collect the money when it becomes due and pay the contractor their net pay directly into their personal bank account.

When a contractor operates through an umbrella company they may be able to claim certain business expenses, which could help them reduce their tax bill, and so take home more money compared to working directly through a recruitment agency.

All compliant umbrella companies work within the same HMRC guidelines when calculating what tax the contractor should be paying, and most umbrella companies will request receipts from the contractor for any business expenditure they may wish to claim for.

Umbrella companies charge a weekly fee (or monthly fee, if that is the frequency of the timesheet) in return for:

Enabling the contractor to have limited company status

Entering into contracts on behalf of the contractor

Raising invoices to the recruitment agency based on completed timesheets

Keeping proper records of all transactions

Taking care of PAYE, NIC & VAT tax requirements

Ensuring the correct net pay is transferred to the contractor's personal bank account

This means the contractor can get on with what they know best and is not stuck for hours, each week, completing complex official forms & spreadsheets.

 

Expenses

It is really important that contractors only claim for business expenses which have actually been incurred and which also comply with HMRC rules.

If the contractor is in any doubt then they should consult their umbrella company for expert guidance. The better, and most reliable, umbrella companies will be able to give the contractor such advice and will have in-house professionals to answer their questions.

Simplify Umbrella is one such company that ensures all their contractors know exactly what business expenses they can claim.

Emma Hainsworth, MD, Umbrella Company, has this to say:

"All our contractors benefits from professional advice as to what expenses they can claim.

"An umbrella company service comes complete with a full back-office administration team.

"An umbrella company is simple, quick and doesn't require much input from the contractor."

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

1. Is an umbrella company my best choice?
2. How to find the best umbrella company
3. Job Centre: part time jobs, temporary jobs & contract jobs
4. Over 10,000 of the latest contract jobs
5. Ask an Expert - have a question about umbrella companies?

 

 

written on2010-08-21 23:37:02

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