How to choose the Best Umbrella Company for your business can be nerve-racking, especially with so many from which to choose. Asking the correct questions and having knowledge on what to look for can make the task much simpler. Knowing about their fees, services, accessibility, and reputation are good places to start. A little time and research will save you money and frustration in the long run.
Hidden entry and exit charges
When looking at potential companies read the fine print and be on the lookout for hidden entry and exit costs. If your income is unpredictable, it might be best to go with a company that offers a set fee rather than one that bases its fees on your earnings, especially if you make a good sum of money. You should be able to choose between weekly, semi-monthly, or monthly billing.
Do some investigating and make sure the company you are looking at has a good reputation. Word of mouth is a smart tool, so ask around for recommendations. Ask the business for references from existing clients that you might know. Know how long they have worked in business and how many clients they have. This can be a good indicator of stability.
The most critical issues for a freelancer is excellent customer service. Find out how easy it is to submit timesheets and expenses. Do they have a website for submissions? Ask about response time. You have a schedule to keep and don’t want to be held up, waiting to hear back from your umbrella company. Look for a company that gives a “money back guarantee” if you are not satisfied with their performance.
Terms of payment
Depending on your particular circumstances, how a company pays could play a significant role in choosing an umbrella company. Some methods of payment will force you to wait for many days to be paid while in others, you will receive payments in just one day as they use a same-day bank transfer. Same-day bank transfer is the best because most of us need our money as soon as possible.
Finally, find out if the umbrella company is a member of a professional organization, This usually assures that they are compliant. While most firms provide insurance, like public liability, professional indemnity, and employer’s liability, it’s best to make sure before you sign on. In case you get a company that meets all these criteria and can serve your needs, you should be in good hands.
Umbrellas are something more than that item keeping you dry from the rainy weather. Nowadays, an umbrella is used for something else. How so? Combine the word umbrella with a company, and you’ll know what I mean.
However, if you are one of those people new to the business of freelancing or those who are currently self-employed then allow me to explain what UK Umbrella Companies are. These will greatly aid individuals such as you when it comes to the risky business of tax issues and taxation affairs.
Uniting a variety of contractors.
Basically, an umbrella company unites a variety of contractors of which are those not permanently employed by one company. These people include IT engineers or builders. Contractors have various reasons as to why they enroll or join such companies.
Filing PAYE and managing tax returns
Working on your own or being a contractor may have its perks, but there are legal issues to be dealt with. Working on your terms also means you as a freelancer or a self-employed individual are responsible for filling PAYE and managing tax returns of which the HMRC would legally require everybody to do. Some individuals are quite experienced in this and choose to do all these on their own but if you aren’t one of those people and you have got the idea that such a job for tax affairs is “taxing” then worry not because this is where an umbrella company comes into the picture.
Managing all tax affairs
The handy umbrella, in this case, helps out by managing all tax affairs, so you won’t have to worry about HMRC legislations or the IE35. What else do they handle? They make sure contractors are in contact with the cash they worked so hard for to earn. This also includes reimbursing all expenses incurred that are directly involved with the freelancer’s work or the self-employed individuals’ business. Imagine the relief you get when you claim all the expenses. This reduces NIC contributions plus your overall tax meaning more money for you.
Processing of claim for your expenses
Some companies offer services that they say can reduce the payments made to the Inland Revenue. This is untrue as it is illegal to pay less than what the Inland Revenue calculates to be your tax rate. You are permitted to claim for your expenses, and these will be processed for you by your umbrella company. Expenses that are chargeable to your client or agency will be refunded to you in full, and those who are not chargeable will be processed as a tax benefit.
If your costs to the umbrella company are high, then you are certainly not getting a great deal. Stay away from companies offering fees of a percentage of your earnings. If you do work for an agency, also be wary of their recommendations for an umbrella company as they are often given incentives to help sell the services of certain companies. Research online to find the best deal for you.
A recent report by the BBC asserted that the umbrella companies were non-compliant as far as the payments of the taxes were concerned. It is, however, critical to point out that not all the offshore umbrella companies avoid paying taxes. There is a difference between an umbrella company that offers offshore tax-structuring and an umbrella company that has an offshore presence. The Offshore Umbrella company usually attempt to remove or reduce the liabilities of individuals in the United Kingdom. It is such companies that give the corporations bad names.
An umbrella firm is defined as that company that acts as agency contractors to an employer who usually work under a fixed contract assignment. In most cases the employment recruitment agency is located in the UK. The recruitment agencies often give contracts to the limited companies as the company liability will be reduced.
There are no doubt differences between the two. Let us look at the manufacturing industry in the United Kingdom to drive the point home. For many years, the residents of the United Kingdom have exhibited that they are okay with suits, jeans, t-shirts, and other items that are made abroad. Most of these products are fully compliant with the regulations and quality standards of the United Kingdom. That is why they are allowed in the country in the first place. These items are usually compliant with the regulations and rules that seek to address fire safety and labeling.
How umbrella firms avoid taxes
There are many ways that companies use to avoid taxes. Most businesses pay the taxes although the pay lower amounts than what they are supposed to pay. For example, may enterprises do not remit the full deduction of the employer from the income of the contractor? Most firms only pay the national insurance amount of the employees and retain the elements for the firm for themselves. They also use other mechanisms like trusts and loans to avoid the tax liabilities of the United Kingdom.
Operation of the umbrella firms
The umbrella companies are critical as they link the recruiters and the employers. They also help many companies save on the administrative costs by taking over the responsibility of preparing the payroll and the overtime sheets of the employees. The amount of money that the umbrella companies can be increased if they are assigned other administrative roles like insurance P45s, P60s, holiday pay, payslips, and the NI of the employers.
They can also help in maintaining the continuity of the essential processes of employment such as the mortgage applications which are usually taken by the full-time employees.