Umbrella Companies:                                                Next >>

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IMPORTANT:

After reading this section of our website, you will NOT have a complete an accurate understanding of umbrella companies until you have read our new section on the Managed Service Company rules or MSC rules.

 

 

Umbrella Companies:

An umbrella company is a specially created company whose shareholders are all contractors. The umbrella company enters into contracts with its contractors' agencies or clients and then pays its contractors a salary on which PAYE is operated. Before the MSC rules (see our "MSC Rules" section), the umbrella would also usually reimburse expenses to the contractor which helped provide a small tax advantage. The introduction of the MSC rules now prevents this.

 

Since the contractors income is therfore received net of PAYE, umbrella companies are not caught by IR35. But of course, umbrella companies do not offer any of the tax breaks of self employment.

 

Who is an umbrella company suitable for?

Since an umbrella company does not offer the tax breaks of self employment, it will only be suitable for certain contractors, such as:

 

* Contractors who are so concerned about IR35 that they want its threat

   100% eliminated

 

* Contractors who are starting for the first time and require a simple and

   fast way to get started (although some online limited company options

   now allow contractors to get started very easily).

 

* Contractors who are between permanent jobs and working on a contract

   in the short term and who do not intend to contract long term.

 

We have assumed our site is mainly used by contractors who are intending to contract in the long term. Those who are intending to contract in the long term but who are still using an umbrella, may find it beneficial to switch to a limited company. On the next page we outline why this might be beneficial and/or suitable and also how you can make the switch from an umbrella company.

 

 

 

 

Next >>

 

 

 

 

 

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Full index of pages:

Home Page    IR35 Background - page 1    IR35 Background - page 2    IR35 Background - page 3

IR35 Rules - page 1    IR35 Rules - page 2    Beat IR35 - page 1    Beat IR35 - page 2

Beat IR35 - page 3    Beat IR35 - page 4    Ltd Company - page 1    Ltd Company - page 2 

Ltd Company - page 3    Ltd Company - page 4    Umbrella Companies - page 1

Umbrella Companies - page 2    Composite Companies - page 1    Composite Companies - page 2

Composite Co - page 3    Composite Co - page 4   MSC - page 1    MSC - page 2    IR35 Insurance

IR35 Investigations - page 1    IR35 Investigations - page 2    Contracts - page 1

Contracts - page 2    Contracts - page 3    Resources 1   Resources 2    Resources 2   Sitemap

 

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