Are you a contractor? If you work for someone else, it is important to know whether you are working for that person in an employed capacity or in a self-employed capacity as an independent contractor.
Your employment status will determine the charge to tax on income from your employment or self-employment. It will also determine the class of NICs, which are to be paid.
Umbrella Companies employ you for tax purposes and complete central returns for all their contractors. It's less hassle and more flexible for you but take home pay is typically less than that the limited company option.
The best option for you depends on your plans, 'one off' contract or 'contractor for life'? [Read More...]
If an umbrella company has a dispensation it means very little, if nothing at all, to you as a contractor.
Any company can apply for a dispensation from HMRC. The BBC has a dispensation as does Shell as does HSBC as does almost every company listed on the stock exchange.
In fact the majority of UK businesses have applied for a dispensation and HMRC have granted them one.
An umbrella company with a dispensation is not remarkable at all. What might make ‘page 14 of a newspaper' - if at all, is if an umbrella company doesn't have a dispensation.
"A dispensation is an administrative tool which benefits HMRC and the umbrella company. It is not meant to benefit the contractor - and it doesn't benefit the contractor in any meaningful way." Stephanie Buck, Director, JMK Group UK.
At the end of the year an umbrella company doesn't have to record the contractor's expenses in their tax return - that's the single main benefit to umbrella companies.
It certainly does not mean they are in any way protected from an HMRC investigation.
If an umbrella company (the employer) does not have a dispensation it would mean that at the end of the year it would have to complete an HMRC form, called a P11D, for every single one of its contractors (the employees).
It would also mean that HMRC would have to check each of these P11D's.
This amounts to an awful lot of administration for both your Umbrella Company and also HMRC.
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It's the basics... Compliance with Tax, VAT, PAYE and fiscal arrangements is mandatory for contractors regardless of whether you use an umbrella company or your own limited company.
Incredible then that there are still rogue umbrella companies and limited company accountants who expose their contractors to fraud. Umbrella Compare provides THE solution, we thoroughly vet all umbrella companies and limited company accountants that we list [Read more...].
Umbrella Compare provides a holistic overview of contracting with the aim of helping new and old contractors find the right payroll solutions. Contracting should be about focusing on the contract, not payroll, accounting, HMRC and bureaucracy.