Cookies policy
Umbrella Company
An Umbrella company is a limited company that employs temporary workers under an overarching employment contract. The umbrella company supplies temporary workers to agencies and end clients and receives payment for the assignment which is then processed by the Umbrella’s PAYE system. The employee is entitled to statutory employment benefits including holiday pay. Usually quick and easy to set up, the employee (contractor) will have all their administration taken care of by the umbrella company and has no statutory responsibilities for the good running of the umbrella company. Working with an Umbrella eliminates paperwork and administrative duties.
Limited Company
Setting up your own limited company means that you’re the majority shareholder and director of your own company, which comes with its own benefits as well as obligations and liabilities. A limited company means that you are in control of your drawings and offsetting expenses. You are able to claim VAT on certain company purchases as well as business expenses. You will incorporate your company and register it with the UK’s Companies House. You will have to submit your annual accounts and Returns. You will be in charge of making sure that the company is run responsibly and meets HMRC deadlines. A limited company pays corporation tax on its annual profits, and VAT is added to all invoices and repaid to HMRC each quarter.
It acts as an employer and provides you with employee rights and benefits.
There are no set up or exit costs associated with working through an umbrella company.
It is an efficient way to receive payment with taxes and National Insurance paid directly to HMRC.
If you are considering a mortgage then your employment through the umbrella company will be taken into account.
CIS (Construction Industry Scheme) is a government scheme with a specific set of rules laid out to handle payments made by contractors to subcontractors for construction and civil engineering work.
IR35 refers to the Intermediaries Legislation conceived in 1999, and was created in an effort to counter tax avoidance.
In 2017 reforms moved the responsibility for determining IR35 from the contractor to the end client in the public sector and in 2021 these reforms extended to those working in the private sector as well.
For more information on IR35 and how it affects you click here
Although the cost of the employer’s NICs is passed on to the contractor the agency invariably gives an uplift to the rate to compensate for this cost being passed on.
Ad-hoc payments: Ad-hoc payments are typically requested by the business owner or accountant outside the standard payroll process, however it is not an expense normally offered by umbrella agencies.
If an umbrella company has gone through the expense involved in completing an accreditation then it may charge more to the contractor. If your agency is insisting that you work through an accredited umbrella company we will try our very best to place you with one at a cost that is acceptable to you.
MyPayroll Solutions Limited (“We”, “Our”, “Us”).
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