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...]
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Just landed your first contract? Has your agency told you to go and find an umbrella company? The chances are you are wondering what an umbrella company is and how it work with you during your contract.
The good news - you have come to the right place. Umbrella Compare has dedicated articles, guides and information that can help you understand what an Umbrella company is, what an Umbrella company does and how to select the right umbrella company for your contract.
Once you are comfortable that you understand what is right for you, we suggest you read our following step by step guide to calling an umbrella company. The guide will help ensure that you ask the right questions and get the right answers.
No. You are an employee of your umbrella company. And with that you get the benefit of a complete end-to-end back-office function.
There's also additional benefits with the umbrella company scheme.
All contractors that use an umbrella company service are within IR35. It is not an issue you need worry about it. And it's nothing so big, anyway.
Like a permanent employee, you are also untitled to receive holiday pay as the umbrella company is your employer. The umbrella company withholds some of your pay which you then get given when you take a holiday.
See what our Experts say about Rolledup Holiday Pay.
As the umbrella company is your employer, you have the same rights as a permanent employee in this respect. The umbrella company is legally bound to pay statutory sick pay to you after four consecutive days absent from work. Just get a doctor's note.
Yes! Send your P45 straight away. Without it you will be paying emergency tax. This is not good - you will be taking home less money! As soon as you pick your umbrella company send them your original P45 (a copy will not do).
If you do not have a P45, your umbrella company will send you a P46, which you will need to complete and return to them. HMRC will then tell them your tax code.
No. Dividends are not payable through a PAYE umbrella company scheme.
Working through an umbrella company offers you no protection whatsoever from an HMRC investigation of your tax affairs.
If, for example, HMRC discover you have claimed expenses to which you were not entitled you will have to repay your tax underpayment (and very likely a fine).
VAT is a compulsory retail tax imposed centrally by the government. There are very few exclusions, and umbrella company fees are not one of those. Every umbrella company has to charge VAT.
It's not all bad news, your umbrella fee is an allowable cost which you can off-set against tax. The umbrella will do this calculation for you automatically.
A dispensation means that the umbrella company and HMRC have less paperwork to do. A dispensation allows a company (any company not just an umbrella company) not to report at year end every single detail that has gone on during the year.
It also means HMRC do not have to check every single detail. It is in effect a cost saving exercise by HMRC, which also benefits an umbrella company.
If your contractor umbrella company has a dispensation (most do) it benefits them - not you. You still have to keep all your receipts, otherwise you will fall foul of HMRC's rules. A dispensation does not state what you can or cannot claim.
If you want to claim a business expense you can as long as it was "wholly and exclusively incurred in the performance of the contract."
Working through an umbrella company, you do not need to worry about any of these things. Your umbrella company takes care of all your VAT, PAYE and National Insurance responsibilities on your behalf. Income tax and NI are deducted and paid to HMRC by your umbrella company. You do not need to do a thing.
'BACS' and 'CHAPS' are standard banking payment terms.
Your umbrella company should support you in finding your next contract; you should expect to have a long-term relationship with your contractor umbrella company that will cover a number of contracts over a number of years.
If you decide to leave your umbrella company they will send you your P45 which you will need to give to your next employer.
A Managed Service Company (or Composite Company), provides services of individuals to other persons. The contractor is placed in a limited company and made a director of that company along with other individuals; they are then paid in shares and dividends.
In the chancellor's pre-Budget announcement of 6th December 2006 he removed the tax advantages that composite and managed service companies could offer their clients.
Managed Service Companies are now a thing of the past.
You are a professional contractor and you intend to seek a succession of assignments through your contractor umbrella company. Your contractor umbrella company's contract of employment is an over-arching contract and enables you to establish your permanent work place at your home. You will use your home office to:
Your assignments therefore take place at temporary workplaces. Why is this important? Because
This rule states that the cost of travel from your home (being your permanent place of residence) to your contract site address (your temporary workplace) is only allowable as a tax deductible expense for as long as you believe your contract will not exceed 24 months.
If you know your contract will be longer than 24 months, you should not claim travel expenses. Once your contract has exceeded 24 months (which you were unaware previously that it would do) you are now deemed as a permanent employee and therefore unable to claim travel expenses.
No. However, your umbrella company will refund to you all business expenses actually incurred by you in the performance of your contract.
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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.