The introduction of IR35 legislation led to a growth in companies offering umbrella services. In addition to this, more and more workers are recognising the freedom and benefits that comes with being self-employed. But before you jump on the bandwagon, it is vital to understand the different kinds of services on offer and whether it suits the nature of your work.

An umbrella company acts in the capacity of a regular employer to independent contractors working under a temporary contract- the umbrella company issues invoices to a recruitment agency (or client) and, after those invoices are paid the umbrella company then pays the contractor- usually through PAYE.

There are three basic things that umbrella companies do for a contractor:
• Convert timesheets from contractors into invoices and submit to agencies
• Process funds from agencies and send to the contractor’s bank account
• Process contractor expenses ensuring they manage their income and tax efficiency.

In other words, umbrella companies provide the same benefits that limited companies provide without the hassle of administrative paperwork or statutory benefits. They take care of all the billing, expenses, administration, tax management, and accounting.

So if you:
• Want to leave paperwork and tax details to expert payroll companies
• Are concerned by the implications of IR35
• Want to get the most out of your tax efficiency
• Want to focus on what you do best
• Want a speedy and simple set up
• Want a timely and efficient payment structure
…then an Umbrella Company is the right choice for you.

But whilst most umbrella companies offer similar services, it is still important for the contractor to check all the details carefully. Sometimes companies don’t make it entirely clear what they will and won’t deal with- expenses are a classic example.