What is a PAYE Umbrella company for contractors?
We explain what the upsides and what the downsides are of working through an Umbrella company for contractors. An Umbrella company provides a ready made invoicing vehicle for contractors and the contractor is an employee of the umbrella company which could have hundreds, even thousands of individuals all on PAYE on its payroll.
In general terms, the individual is caught by IR35 and so there are no issues about status, other than the End User (and Agency) does not want to be the employer.
The Umbrella company supplies the contractor to the agency for a contract at the End User. The benefit to the contractor is that by being an employee of the Umbrella company, they can claim travel and subsistence expenses that would not be available to an employee deemed to be based ‘on site’.
The Umbrella company charges the contractor a fee for the provision of its service, but the contractor is still better off than someone on PAYE as an employee of the End User. Umbrella companies come in all shapes and sizes – their main purpose is to make life simple for contractors while maximising their earnings; by taking responsibility for admin and compliance on behalf of the contractor and reducing the amount of tax that they pay. This is what NoPalaver Umbrella can do for you!!!
By joining NoPalaver Umbrella, you are handing over the responsibilities, admin and hassle to a fully compliant Umbrella company who bills your client through its own limited company structure and pays you a salary based on the work you do for your clients. In a lot of cases, you still have to secure your own work, but they do the rest, such as payroll, debt collection and paperwork. It’s very easy, saves time, and removes the need to be aware of the legal requirements and risks involved with running a limited company.
If your clients will not work with a sole trader, yet insist that you work in a way that is ‘deemed employed’ without wanting to actually employ you, this offers a way of working with those clients.
However, be sure that the client (or agency) knows what they are doing: The NoPalaver Group advises that if an employee is right for the position, clients (and agencies) should go ahead and hire an employee, and not attempt to get around the obligations this entails. If a contractor really is right for the role, there is not really any excuse for not using a proper business-to-business contract.
The fact that you are paid a salary and effectively have employee status helps with proof of earnings for loans and so forth.
Although you are paid as an employee, you don’t have a boss. You are your own boss and you decide who you work for and when.
It’s not your own company and therefore it’s harder to build your own brand. It’s not quite as tax efficient as operating through your own limited company because all the money you receive is paid as employment income under PAYE regulations.
Arriving at a Verdict
If you are intending to contract for a short period, say a few months, this could prove to be the best option.
The same applies if you are willing to forego the tax and commercial advantage of running your own limited company in order to rid yourself of the extra responsibility and paperwork.
If you are unavoidably ‘IR35 caught’ it also represents a good choice. That choice is, and should be NoPalaver Umbrella.
Have a look in our Services section to see the Umbrella Solution we could be providing for you.
Please contact us to speak to us straight away or request a callback.