Overview
Umbrella Company services are viable option for most of the new and experienced contractors. These companies are beneficial for contractors in many ways. However, there are few matters, which should be taken into consideration by contractors while choosing an Umbrella service Company.
Advantages of PAYE Umbrella Company
PAYE Umbrella Company provides various benefits to the contractors, which are explained as under.
There are different services available for contractors that help them to start a successful contracting career.
PAYE Umbrella or ‘Salary only’ scheme
This is the most commonly used arrangement offered to contractors. There is no need to find ways to work outside IR35. The only source of income available is the salary and contractors are allowed to claim business expenses.
Some other arrangements
Apart from above mentioned methods there are some other options available for contractors, which include foreign currency loans and offshore arrangements. These schemes are promoted to deliver better payment solution than UK based Umbrella Company. However, the basic thing to consider is that whether such arrangements suit a specific contractor and what is the legal aspect of these services. In the budget 2004, it was announced that all the “Tax avoidance” schemes should be registered with HMRC. Apart from this, steps were taken by HMRC to tackle disguised remuneration in December 2010.
Payment procedure and time of processing
The processing of payments through Umbrella Providers is relatively slower. Moreover, it is also complained by contractors that the services provided are not up to the mark.
Hence, it is hereby advised that a contractor should clarify these issues before joining a particular Umbrella Company.
Policy regarding payment retention
The contractors working through Umbrella Companies act as the employees of such companies. It is possible that some companies will retain some amount of payment to cover holiday pay and other like matters and pay them on later stage. It is important to make sure, when such payments would be released or is there any reason for which Umbrella Company can retain such amount for a specific period.
Agency’s recommendation regarding a specific Umbrella Company
Umbrella companies are mostly recommended by agencies keeping in view their service patterns and overall quality. Agency prefers those companies, which are beneficial for both the contractor and agency. The reason for such preference is that agencies are looking for hassle-free and reliable options. Therefore, some agencies provide preferred supplier list and contractor needs to select a company to work with. However, few agencies have some commercial arrangements with Umbrella Companies and they don’t bother about the quality of services provided to contractor. Hence, it is advised that contractor may ask the agency about the criteria of their preference.
Policies about expenses
There are such Umbrella Companies, which advertise that contractors can claim expenses without any receipts due to their arrangements with HMRC. This scheme is closely monitored by HMRC and may cause trouble for contractors if they claim wrong expenses or those not supported by receipts.
How much Umbrella Companies charge.
The fee charged by Umbrella Companies varies mainly due to the quality of services they provide. Normally top rated companies charge a contractor £25 to £30 for their services. Some companies do charge on percentage basis but you can negotiate this matter before joining.
How much experienced an Umbrella Company is?
There is no hard and fast rule regarding the experience and qualification of a particular Umbrella Company as anyone can establish such company. However, it is up to you to monitor closely the previous experience and conduct of a company before joining it. A contractor must look for a company, which is handled by experienced and qualified accountants.
Umbrella Company services are viable option for most of the new and experienced contractors. These companies are beneficial for contractors in many ways. However, there are few matters, which should be taken into consideration by contractors while choosing an Umbrella service Company.
Advantages of PAYE Umbrella Company
PAYE Umbrella Company provides various benefits to the contractors, which are explained as under.
- There is no need of starting the limited company and indulge into the hassle of maintaining it.
- PAYE Umbrella handles the matters regarding tax and payment processing. Contractor is relieved from the burden of managing payroll matters, VAT returns and company accounts.
- It is an ideal option for short-term contractors and they can start contracting without forming their own limited company.
There are different services available for contractors that help them to start a successful contracting career.
PAYE Umbrella or ‘Salary only’ scheme
This is the most commonly used arrangement offered to contractors. There is no need to find ways to work outside IR35. The only source of income available is the salary and contractors are allowed to claim business expenses.
Some other arrangements
Apart from above mentioned methods there are some other options available for contractors, which include foreign currency loans and offshore arrangements. These schemes are promoted to deliver better payment solution than UK based Umbrella Company. However, the basic thing to consider is that whether such arrangements suit a specific contractor and what is the legal aspect of these services. In the budget 2004, it was announced that all the “Tax avoidance” schemes should be registered with HMRC. Apart from this, steps were taken by HMRC to tackle disguised remuneration in December 2010.
Payment procedure and time of processing
The processing of payments through Umbrella Providers is relatively slower. Moreover, it is also complained by contractors that the services provided are not up to the mark.
Hence, it is hereby advised that a contractor should clarify these issues before joining a particular Umbrella Company.
- After you submit the timesheets, how quickly your Umbrella provider will send them to agency for further processing.
- The time consumed by such companies, to transfer payments into your bank account.
Policy regarding payment retention
The contractors working through Umbrella Companies act as the employees of such companies. It is possible that some companies will retain some amount of payment to cover holiday pay and other like matters and pay them on later stage. It is important to make sure, when such payments would be released or is there any reason for which Umbrella Company can retain such amount for a specific period.
Agency’s recommendation regarding a specific Umbrella Company
Umbrella companies are mostly recommended by agencies keeping in view their service patterns and overall quality. Agency prefers those companies, which are beneficial for both the contractor and agency. The reason for such preference is that agencies are looking for hassle-free and reliable options. Therefore, some agencies provide preferred supplier list and contractor needs to select a company to work with. However, few agencies have some commercial arrangements with Umbrella Companies and they don’t bother about the quality of services provided to contractor. Hence, it is advised that contractor may ask the agency about the criteria of their preference.
Policies about expenses
There are such Umbrella Companies, which advertise that contractors can claim expenses without any receipts due to their arrangements with HMRC. This scheme is closely monitored by HMRC and may cause trouble for contractors if they claim wrong expenses or those not supported by receipts.
How much Umbrella Companies charge.
The fee charged by Umbrella Companies varies mainly due to the quality of services they provide. Normally top rated companies charge a contractor £25 to £30 for their services. Some companies do charge on percentage basis but you can negotiate this matter before joining.
How much experienced an Umbrella Company is?
There is no hard and fast rule regarding the experience and qualification of a particular Umbrella Company as anyone can establish such company. However, it is up to you to monitor closely the previous experience and conduct of a company before joining it. A contractor must look for a company, which is handled by experienced and qualified accountants.