Working as a contractor is enviable in many respects. It pays well, there is the opportunity to work on many different and interesting projects and to form a network of valuable contacts. On the downside, it's essential that employment status remain compliant with avoiding ir35. At some point, people ask themselves, "should I use an umbrella company?"
What is an Umbrella Company?
An umbrella company performs the functions of an employer for agency contractors working under fixed term contracts for clients, providing standard employee benefits. If the umbrella company is not considered to be a real employer, it's likely that the contractor's claims for expenses would be disallowed, for example. Since IR35 was enacted in 2000, umbrella companies became much more widely used than formerly. Of the approximately four million temporary workers in the UK, about 1.5 millions are considered to be management or professional. Of these, it is believed that 14% are working through umbrella pay companies.
What Differentiates One Umbrella Company from Another?
In order of importance, the three factors to look for when choosing an umbrella company are compliance, weekly fee and customer service. Compliance is absolutely essential, since this is the primary reason anyone would use umbrella companies in uk. The admin fee and customer service matter, but to a lesser degree. If the tax people ever decide to question status, the umbrella company's level of compliance is critical.
Compliance is a Full-time Occupation
For umbrella companies london and elsewhere in the UK to remain compliant is expensive and time-consuming. Many smaller umbrella companies will not have the financial resources or staff to devote to this undertaking. HMRC wants compliance from all concerned and seems determined to eliminate those firms who don't measure up. In order to remain compliant, the umbrella company must do everything required by HMRC, the Health and Safety Executive and Companies House, etc.
Tax Avoidance Umbrella Companies
If they offer about 90% of the contract, paid with never-to-be-repaid loans from offshore tax havens, this is a sign of an umbrella company to avoid. Many contractors who signed on to this scheme are now in trouble with the tax collectors.
PAYE Contractor Umbrella Companies
These only work for a contractor earning less than £25k per year who needs someone to do the admin. PAYE umbrella companies are not a good tax strategy for contractors earning more than £25k.
The Umbrella Company Solution for Professional and Management Contractors
UK Contract Partners has taken two years and a great many legal opinions to be sure that everything they are doing is 100% compliant. In the process, they learned about tax breaks granted by the government that most contractors have never known about. Their mission is to allow contractors to collect the highest amount from their contracts while keeping admin costs low. Money stays within the UK at all times. Give them a call or visit their website and learn how UK Contract Partners have the perfect solution for you.