| What is an umbrella company? - | | | | that are related to work purposes. |
| An umbrella company acts as an employer to | | | | Make sure that you obtain a receipt for every |
| those who work under a fixed term contract or | | | | expense that you claim - this is because HMRC |
| are independent contractors. Umbrella companies | | | | can investigate you up to six years after you |
| remove the administrative duties and | | | | make a claim. Ensure that you are covered by |
| responsibilities associated with running a Limited | | | | the umbrella companies insurance, which includes |
| Company. | | | | public and employer's liability and professional |
| | | | | indemnity insurance. |
| How does an umbrella company work? – | | | | All umbrella companies should use the same |
| If you employ an umbrella company, it will issue | | | | calculations given by the HMRC, which means that |
| invoices to your client on your behalf. When the | | | | your earnings should not be any higher or lower |
| payment of the invoice is made by the agency or | | | | than they are with any another umbrella |
| client, the umbrella company will calculate tax | | | | company. What differs between umbrella |
| owed and National Insurance contributions which | | | | companies are the service and the fees that they |
| are due. The umbrella company will pay you | | | | charge. You usually have to pay a monthly fee in |
| through the PAYE (Pay As You Earn) scheme and | | | | this situation. However, if you are a contractor, |
| you will receive your net pay in your personal | | | | you will not be working all year round, so it is |
| bank account. This way you are entitled to | | | | worthwhile looking into umbrella companies that do |
| reduced taxes and benefits such as national | | | | not charge a fee when you are not working. |
| insurance liabilities, which employed status usually | | | | Certain umbrella companies offer a free and |
| brings. | | | | instant set up and do not charge a penalty or |
| | | | | hidden fees if you leave their employment – |
| Tips when dealing with an umbrella company – | | | | they are extremely flexible. |
| Your employment contract with the umbrella | | | | Ensure that the umbrella company you select is |
| company should be drawn up as if you are a | | | | legitimate and registered with various revenue |
| ‘permanent employee'. You can list your | | | | services and follows legal procedures. Before |
| home address as your permanent work place, | | | | selecting, make sure you question the umbrella |
| and this enables you to claim expenses. Keep in | | | | company on all aspects. |
| mind that you are only able to claim expenses | | | | |