- What is an umbrella company?
- What is IR35?
- What is a contractor?
- How am I classified as an employee?
- Are there any tax advantages for using an umbrella company?
- How can I calculate my pay?
- What is classed as an expense?
- So what expenses can I claim for?
- What is an Undischarged Bankrupt?
- What is a disqualified Company director? How can I see if someone has been disqualified?
Umbrella companies are primarily companies that act as employers to contractors who work on temporary contracts. This can either be through a Recruitment Agency or as an individual. The umbrella company will invoice the recruitment agency or client on behalf of the contractor and when payment of the invoice is received, the umbrella company pays the contractor through the PAYE scheme whilst allowing them to offset legitimate business expenses.
A good umbrella company will offer the contractor most, if not all, of the benefits of being a limited company, all this without the responsibilities, headaches, cost and time of the accounting and financial matters. In short this means the contractor can work in a tax efficient manner, without having to worry about IR35.
IR35 was legislation introduced by HM Revenue & Customs as part of the Finance Act 2000, and was aimed at addressing the £900 million loophole in the tax law.
A contractor can work in different ways, either through an umbrella company or a limited company. This, with the aid of an accountant, enables them to manage their income. Historically this can mean a low take-home salary drawn with expenses and a balance usually in the form of a dividend. A dividend will not attract National Insurance deductions or tax below a certain value, and so often is much more appealing to contractors.
IR35 target these individuals as opposed to umbrella companies who comply with the IR35 rules. The system is governed by the self-assessment process, in addition to the Inland Revenue assessing what tax it considers to have been avoided – up to 100% of the avoided tax can be issued as a penalty.
This terminology describes a person working on a temporary basis, i.e., short-term or long-term contracts for a client, in most cases this being a recruitment agency. Contractors often refer to themselves as freelancers or consultants although other terms do exist.
One Click Umbrella will employ you on an overarching employment contract meaning you are free to find your own assignments but still benefit from the protection that being employed gives you. It’s that simple! We sort out all your administration, insurance, accounts and employment rights. All your tax and National Insurance deductions are all paid through the normal HM Revenue & Customs pathways.
Yes, contractors tend to work in or at multiple sites, none of which are permanent. These sites or work places are classed as temporary, therefore the contractor can offset the cost of the travel & subsistence expenses getting to and from work, in addition to whilst being on site.
Simple, for a rough guide use HMRC online PAYE Tax calculator. This will tell you how much take-home pay you will receive as an employee of One Click Umbrella.
A rechargeable expense otherwise referred to as a billable expense, are costs you incur on a daily or ad hoc basis whilst on a contract. These have to be agreed/authorised by the client or agency prior to the contract starting so please do agree them in writing before the commencement date to avoid confusion.
Rechargeable: Received funds that are processed without tax and NI being deducted, reimbursed to you in full.
As a contractor, claiming can be a quagmire, or what is and what is not a legitimately claimed expense. I.e., Did you know you are allowed to claim for subscriptions to trade publications and textbooks if they are required?
Below is a list of just a few of the legitimate expense claims:
Mileage (45p per mile up to 10,000 miles, 25 p per mile there after)
Subsistence (Daily food & drink)
Taxi, rail, air, and bus travel
An undischarged bankrupt is, in general, disqualified from holding certain public and private offices such as that of a member of legislature or of a director in a firm.
A disqualified director is an individual who has been banned from taking the role of director of a limited company as a result of not meeting their legal obligations. They can’t be a director of a UK limited company or an overseas company that has links to the UK, nor can they be involved in marketing or running such a company. Learn more
Companies House maintains a list of individuals who have been disqualified and this list can be found here