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What does an Umbrella Company do?

An umbrella company does all paperwork for contractors. An umbrella company is your limited company. An umbrella company will invoice your recruitment agency collect your money, work out your taxes, and deal with HMRC.

More and more people are turning to life as a contractor. Some because they may have lost their full time job and have no choice, and others who make the conscious decision to change the way they work - and the rewards they get!

Whatever the reason for deciding to become a contractor, the vast majority never look back and enjoy the lifestyle & freedom that freelance contracting brings with it.

 

 

Whilst contracting has many attractions you should consider all the angles first. For example, do you want to go through all the hassle, cost and pain of setting up and managing your own limited company? Or would you prefer to make use of one of the umbrella companies out there who will take on all the administration and paperwork for you?

An umbrella company will do lots of the horrible things for you. Apart from acting as your limited company they will;

Invoice your recruitment agency once you have done your work

Collect your money (so you don't have to open a business bank account)

Work out and pay all your taxes

Deal with HMRC on your behalf

 

Accountant Lawyer Bookkeeper

If you're not experienced in the ways of accountancy, contracts, company law, payroll, and general administration these issues can be quite frightening at best, and an ongoing nightmare at worst.

It takes time to do these tasks properly, and you're expected to have in depth knowledge of various accounting and legal disciplines as well.

The last thing you want is to get the fundamentals wrong. Inexperience and lack of knowledge is not a defense any Court will accept should HMRC find you have not completed all the necessary forms on time and correctly.

 

 

So what does an umbrella company do for a contractor? Well, actually quite a lot. In return for a modest processing fee a good umbrella company will take care of all your day to day paperwork. Things like:

Contracts

Record keeping

Invoicing

Credit control

Expenses

Payroll

Company law

PAYE

Employment law

IR35

The Working Time Directive and other EU laws

 

Work Harder or Smarter?

Do you really want to do these things yourself? Particularly at the end of your working day? There are some contractors who do, but the vast majority of freelancers are more than happy to pass this burden onto an umbrella company. It means they can get on with their contract while knowing all the boring, but essential, bits are being done by someone else.

Emma Hainsworth, MD, Simplify Umbrella explains:

"Using the services of an umbrella company makes sense for any contractor. Why would a contractor want to worry about dealing with HMRC, understanding complex tax laws and have to complete endless forms when they don't have to?

"Apart from freeing up the contractor's time umbrella companies also take away all the stress, and at a far cheaper price than it would cost to hire a specialist accountant to look after the books of a limited company."

 

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

1. Job Centre
2. Over 10,000 freelance contract jobs
3. How to find the best umbrella company
4. IR35 test for contractors
5. How to write a killer CV

 

 

written on2010-08-21 23:51:13

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