IR35 legislation has allowed for various benefits for working with some umbrella company from the day it was introduced. These benefits provide numerous tax advantages. Additionally, there are special dispensations in expense meaning that these companies can be useful for the provision of responsible and cost effective methods of working with the contractors. For assisting the contractors, such umbrella companies have negotiated some dispensations with the HMRC for deriving high levels of efficiency in operations of the contractors.
There is one important point that needs to be remembered when you opt for the umbrella companies. Some of these companies make claims that they are being approved by the HMRC. However, the fact is that HMRC never accredits or approves any such companies; hence it is advisable that you don’t fall for such wrong claims in the first place. You are bound to be taxed as normal PAYE as in the case of employees.
When you opt for working via the umbrella companies, the contractors will be granted to claim for the basic expenses, thus hiking their take home salaries in the process by way of reduction in the tax amounts needed to pay. All the receipts for your expenses need to be saved. These are the ones which are claimed. Claiming of the expenses which are never paid, or which do not have receipts will lead to your accounts being investigated by the tax people.
In the true sense, when you choose to join some Work via an Umbrella Company, it means that as a contractor, you become the employee of such company. The contractor is needed to submit time sheets, and the company then becomes responsible for taking care of the paperwork for administration. This paperwork includes payment collection, invoicing, VAT, NI, PAYE and so on. This leads to lesser worries on the part of the contractors in regards to the complicated calculations. They just need to wait for receiving the payments for the number of hours they put in for work.
It is a normal practice that such umbrella companies will make the contractors wait till they receive the payments from the clients. However, there are companies that will not wait until receiving payments, and pay you immediately once the work is completed from your end. The companies usually charge flat fee rates which are not based on the earnings. You need to ensure that there are no deductions in regards to leaving and joining for the contractors. It is also necessary that the contractors are not made to pay when they do not work.
One of the biggest benefits of joining some umbrella company is the achievement of control and freedom over your work. You will also not need to bother about the administration issues concerned with your job. Some of the good and reputed companies will offer professional and complete services which are inclusive of contracts for full-time employment, management of time sheets and invoices, taxations, NICs, PAYE, dealings for you with HMRC and guaranteed hours of work.