What Does an Umbrella Company Do For a Contractor

Invoice, Expenses, PAYE

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 and running their own limited company.

This is because setting up and running your own limited company can be time consuming, expensive and 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.

Once you join an umbrella company (registration is free) all the contractor has to do is send the umbrella company their timesheet at the end of the week or month (dependent on what is agreed with the recruitment agency), plus any expenses.

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.

What does an Umbrella Company Do?

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!

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.