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Do Umbrella Companies Benefit Contractors?

Freelance temporary contractors love the lifestyle and sense of freedom that comes with being self-employed. Choosing how to trade as a contractor is an important part of freelancing, and the choice between setting up your own limited company or using the services of an umbrella company has to be considered.

Whilst some contractors are happy to take responsibility for raising invoices, completing the correct HMRC tax forms and keeping detailed records of their business activity, many contractors prefer the less stressful option of using the services of an umbrella company.

Unlike permanent employees, contractors face various tax implications which can affect exactly how much they take home in their pay packet each month. Most contractors look for a way of reducing their tax bill, where possible, and rely on the professional advice of their umbrella company. Jim Goddard, Divisional Manager of Contractor Supermarket featured umbrella company Oriel Contractors comments:

"It is possible for contractors using an umbrella company to off-set some of their tax liabilities by claiming for legitimate business expenses.

"The better umbrella companies, like Oriel Contractors, have a team of expert tax advisors on hand to ensure their contractors know exactly what expenses can be claimed and so take home the maximum net pay legally allowed by HMRC.

"Oriel Contractors continually review it's processes to ensure compliance with the latest tax laws meaning that our contractors can sleep easy knowing they are protected from any future HMRC investigation."

Key Benefits of Working Through an Umbrella Company

One of the other key benefits provided by an umbrella company is that they offer self-employed workers with a ready-made limited company through which they can operate multiple contracts. The umbrella company does all the administration & paperwork and only charges when the contractor is working, so in between contracts there are no worrisome bills.

The benefit from using an umbrella company is that the contractor saves time and worry on all the complex administration usually associated with running a limited company, including:

Processing timesheets

Understanding business expenses

Raising invoices in the correct manner

Credit control

Calculating tax and National Insurance

Collecting payments from the recruitment agency or end client

Handling legal contracts

General paperwork and filing

Staying up to date with ever changing legislation

Inclusive Benefits

All legitimate umbrella companies provide additional benefits such as holiday and sick pay. Umbrella companies can also give the contractor access to other benefits not readily available to them, such as pension schemes, private healthcare, life and critical illness insurance and childcare vouchers.

Umbrella companies provide Employer's Liability and Public Liability insurance cover within the fixed price, and most also include Professional Indemnity Insurance, which helps to cover the contractor in the event of any legal cases being brought against them in respect to the services that they provide to their clients.

Oriel Contractor's Goddard continues:

"By registering with an umbrella company, a contractor becomes an employee of the umbrella company, while retaining the desired flexibility to find and choose their own work, clients, rates, terms and conditions.

"Umbrella companies help contractors to save time on administration, time which could be better spent by most contractors. Umbrella companies are a far simpler way for contractors to trade whilst reducing their tax burden to the lowest possible level."

An umbrella company is designed for today's modern contractor who has better things to do after a hard day's work than sit in front of a computer and struggle with spreadsheets, forms and figures.

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written on2010-08-22 00:14:23

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