| Umbrella Companies provide a ready made payroll | | | | whether your Company advertises that they |
| solutions for contractors, removing the | | | | have a dispensation, you must obtain a receipt for |
| administrative duties and responsibilities associated | | | | every expense that you claim, the reason for this |
| with running a Limited Company. An Umbrella | | | | is that HMRC can investigate you up to six years |
| Company will issue invoices on the contractor's | | | | after you make a claim. If you claim for an |
| behalf, receive payments from end clients or | | | | expense where you cannot prove that you have |
| agencies, calculate tax owed and National | | | | incurred a cost, an HMRC investigation could result |
| Insurance contributions which are due. At the end | | | | in you having to pay the underpaid tax, charges |
| of this, you, the contractor will receive your net | | | | and interest. As an employee, you should also be |
| pay in your personal bank account. | | | | covered by the Umbrella Company's insurance; |
| Contractors are employed in much the same was | | | | this usually includes public and employer's liability |
| as any business which employs staff. Your UC | | | | and professional indemnity insurance. The |
| should be paying you through PAYE, deducting | | | | insurance provided and level of cover will vary |
| Income Tax and National Insurance contributions | | | | from one Umbrella Company to the next, so it is |
| from your gross earnings and issuing you with a | | | | worth querying what is provided if you have any |
| P45 if you leave their services or a P60 at the | | | | concerns. |
| end of each tax year. | | | | In summary, all Umbrella Companies use the same |
| Your employment contract should be drawn up as | | | | calculations laid out by the HMRC. This means that |
| if you are a 'permanent employee' with the | | | | your earnings should not be any higher than they |
| expectation that you will be working for the UC | | | | are with another Umbrella Company. The only |
| for more than one assignment. Your home would | | | | difference would be the level of service you |
| be considered your permanent work place, any | | | | receive from them and the fees that they |
| assignment you undertake is regarded as your | | | | charge. Essentially an UC provides a safe, simple |
| temporary work place, this arrangement enables | | | | and compliant method of employment for |
| you to claim expenses, keeping in mind that you | | | | Contractors who do not want the hassle of |
| are only able to claim expenses that are wholly | | | | running their own Limited Company. |
| and exclusively for work purposes. Regardless of | | | | |