How to find the best umbrella company
When you are searching for the Best umbrella company, you should bear in mind the following things:
Since all umbrella companies are governed by HMRC, you will have same earnings through whatever company you work. However, the difference between your earning is the margins that an umbrella company retains.
The first thing to check is whether the umbrella company bases its margins on your earnings or not. Since umbrella company will not have to do any extra work for higher earners, it should charge the same whether you earn £50 or £1000 per day.
Third party payments should be processed and received through a PAYE system after budget legislation in 2007. All other means such as FX schemes, loans and dividends are unlawful since they fall under the category of tax avoidance.
Remember, only HMRC has the right to decide whether certain costs should be considered as allowable expenses or not. Umbrella company does not have anything to do with it. A cost can only fall under allowable expenses if it is:
‘Wholly and exclusively incurred in carrying out the employment and its duties’.
If you can’t prove expense, you can’t claim it. Similarly, if you have not spent anything, you can’t claim it. You should receive a receipt for every expense incurred. If you try to do something unlawful by claiming expenses that were not incurred or not proved, HMRC will initiate an investigation and make you pay the underpaid tax. It may also result in heavy fines.
All umbrella companies advertise themselves as HMRC complaint. IR35 determines the way you have to be paid and if you fall within IR35, you have to follow the payment instructions in legislation whether you work through your own limited company or an umbrella company. In such cases, your payments should only process through PAYE system.
If you have received an agency recommendation, it may come because of an ‘incentive’ policy from the umbrella company. However, personal recommendations are good indicator for choosing the right umbrella company. Just differentiate between the two and you will not have any problem.
Finally, when finding the right umbrella company for your contracting needs, look for the ones that prove their claims. If these claims seem too good to be true, you better find another option.
Since all umbrella companies are governed by HMRC, you will have same earnings through whatever company you work. However, the difference between your earning is the margins that an umbrella company retains.
The first thing to check is whether the umbrella company bases its margins on your earnings or not. Since umbrella company will not have to do any extra work for higher earners, it should charge the same whether you earn £50 or £1000 per day.
Third party payments should be processed and received through a PAYE system after budget legislation in 2007. All other means such as FX schemes, loans and dividends are unlawful since they fall under the category of tax avoidance.
Remember, only HMRC has the right to decide whether certain costs should be considered as allowable expenses or not. Umbrella company does not have anything to do with it. A cost can only fall under allowable expenses if it is:
‘Wholly and exclusively incurred in carrying out the employment and its duties’.
If you can’t prove expense, you can’t claim it. Similarly, if you have not spent anything, you can’t claim it. You should receive a receipt for every expense incurred. If you try to do something unlawful by claiming expenses that were not incurred or not proved, HMRC will initiate an investigation and make you pay the underpaid tax. It may also result in heavy fines.
All umbrella companies advertise themselves as HMRC complaint. IR35 determines the way you have to be paid and if you fall within IR35, you have to follow the payment instructions in legislation whether you work through your own limited company or an umbrella company. In such cases, your payments should only process through PAYE system.
If you have received an agency recommendation, it may come because of an ‘incentive’ policy from the umbrella company. However, personal recommendations are good indicator for choosing the right umbrella company. Just differentiate between the two and you will not have any problem.
Finally, when finding the right umbrella company for your contracting needs, look for the ones that prove their claims. If these claims seem too good to be true, you better find another option.