Umbrella Companies are Made for Contractors

Basically, an umbrella company is an off the shelf limited company for freelance contractors who don't want to go to the bother of setting up & running their own limited company.

This is because setting up & running your own limited company can be time consuming, expensive & complex. Contrast this with the service of an umbrella company which is simple, quick and doesn't require much input from the contractor.

• An umbrella company will act as the contractor's employer, taking on all the paperwork and administration duties that are legally required.

A contractor would normally get their contract through a recruitment agency that specialises in contract placements. The recruitment agency only wants to deal with a contractor who has 'limited company' status in order to reduce its own liabilities.

Invoicing Tax & Payment

Once you join an umbrella company (registration is free) all you have to do is send the umbrella company your timesheet at the end of the week or month (dependent on what is agreed with the recruitment agency).

The umbrella company then invoices the recruitment agency, chases up and collects the payment, calculates the correct tax and National Insurance and pays the contractor directly into their own personal bank account.

• It really is that simple, and doesn't even cost much. Better still you don't have to send them any money as their fee is deducted from the payment before it goes into your bank.

Today, umbrella companies are the most popular method of getting limited company status because of government legislation called IR35. The IR35 laws are complex but essentially cover all but the very few contractors.

Why use the Services of an Umbrella Company?

Contractors use an umbrella company because it is hassle free, cost effective and everything is taken care of for you. The basic role that umbrella companies provide include:

1. Invoicing
2. Record keeping
3. Collecting your money into their business bank account
4. Payroll, including tax and National Insurance calculations
5. Detailed accounting
6. Financial reporting

The best bit is you have no worries about IR35 and can sleep peacefully at night with no worries about the tax man knocking at your door!

PAYE Calculation

All umbrella companies have to use the same PAYE calculation as defined by HMRC to work out how much tax should be paid so that element is not a factor for contractors when choosing which umbrella company to register with.

• The umbrella company registration process in both fast and simple. Any contractor calling us for the first time will dealt with by a fully trained member of staff, who understands a contractor's needs. We can have a contractor registered as an employee of our umbrella company within minutes meaning they can start their contract without further delay.
• A decent umbrella company's role is to be the complete-back office support for contractors. Contractors can relax & focus on their contract knowing their administration and paperwork is completed on time - every time and to the highest standards."

An umbrella company's main responsibility is to provide payroll solutions to its contractors. So it is vital to choose a good umbrella company that will take care of all your issues. Then you can focus on your job and leave the rest to them.