Any Questions
Frequently Asked Questions
Some of the most frequently asked questions in relation to our UK umbrella company solution are shown below. If you have a question not answered below then please contact us. We'll be happy to offer assistance.
I have already started a contract and haven't got an umbrella company - Is that a problem?
Most agencies and clients will insist on paying you via a limited company to avoid any potential liabilities they could be faced with if they pay you as a self employed individual. You will also need to supply details of your umbrella company or limited company to your agency to enable a contract to be drawn up correctly, without which you may run into difficulties should any problems arise when you commence work. Joining our umbrella company is simple and free, and we can have all the details required by your agency to pay you and issue a contract immediately. We will also ensure that HM Revenue & Customs are aware of your working arrangements.
Where will I pay my Taxes and National Insurance?
Our UK umbrella company will deduct and pay Income Tax and National Insurance to HM Revenue & Customs in the UK on a monthly basis.
Can I claim expenses to reduce the tax I pay?
Yes. You can claim allowable business expenses to reduce the tax payable on your income. Expense claim forms should be submitted when you send us your timesheets. Our payroll team will review any claims that you make and tax relief will be provided each time we process your pay.
Are your fees tax deductible?
Yes. You do not need to claim these on your expense claim forms. Tax relief is automatically provided on your fees, insurance and any bank charges.
I currently have my own limited company but my agency insist I use an umbrella company, can I use your umbrella company just for one contract?
Yes. You can simply join our umbrella company and use our services for a single contract. You can still contract through your existing limited company if you have other contracts at the same time.
Am I tied in to your umbrella company?
No. You can join and leave at any time. There are no joining or leaving fees and our weekly fees are only charged whilst you're actually working.
Can I receive dividends from your umbrella company?
No. The income you receive from our umbrella company will be in the form of salary and allowable expenses. Employees of our umbrella company cannot own shares and therefore cannot receive dividends. This arrangement ensures that you remain fully protected against IR35 (Intermediaries legislation).
What is IR35?
IR35 was the name given to an Inland Revenue bulletin released in 1999. It was issued in response to a 1990's trend, whereby employees of companies were transferring to contractor status and then carrying on exactly as before. Same employer. Same office. Same job. The benefit being that as contractors people could manage things in such a way that they could avoid large amounts of tax and national insurance quite legally by replacing salary income with dividends. IR35 was introduced to close this loophole.
What is a dispensation?
If an employer regularly reimburses employees for allowable expenses such as work related travel, the employer can apply to HMRC for a dispensation. If granted the employer will no longer have to report the reimbursements covered by the dispensation on a P11d. For large employers this can save a great deal of administration.
Be aware that some umbrella companies have obtained dispensations from HMRC and use them to market a greater take home pay. You should however be aware that a dispensation is not a licence to give away tax-free money to employees, it is purely a means of reducing the administration burden. If your umbrella company uses a dispensation in this way, you must ensure that you keep records of all expenses claimed and reimbursed to you. It will be your responsibility to prove that amounts reimbursed to you by your employer were not excessive in comparison to the actual expenses you incurred.
Although it may seem like a good deal when you sign up with an umbrella company offering vast expense allowances, the consequences can be extremely detrimental.
Liberty Bishop
Unit A1, Basepoint Business & Innovation Centre, 110 Butterfield, Great Marlings, Luton, Bedfordshire, LU2 8DL
