Umbrella Companies | Freelance Workers and Contractors ...

In Great Britain, an umbrella company is a useful tool for managing a freelance business. There are several types of umbrella companies that offer services to self-employed contractors and others needing assistance paying taxes and keeping business accounts. Umbrella companies are based in the United Kingdom and offshore companies are illegal.

As part of an umbrella, participants are considered employees with all employee rights and benefits. Health leave, pension schemes, and child-care assistance are managed by the umbrella company, providing participants with security and hassle-free business administration.

As its name suggests, an umbrella company covers an individual?s needs for employment services like accounting and payroll services for a fixed fee. An umbrella system known as PAYE umbrellas offer pay-as-you-earn (PAYE) contracts. PAYE umbrella companies are the most common type of umbrella service provider.

Workers need to spend time working and an umbrella company can save hours of invoicing and accounting time. The company will issue an invoice, pay the taxes and insurance due and send the net pay to a writer?s bank account. There are a variety of service and plan options for those anxious to avoid setting up a limited company.

Since the introduction of the HMRC IR35 tax all contractors must abide by the tax code. The IR35 system offers two categories for contractors, either inside or outside the code. If a writer is caught inside the IR35 code it will cost about 20% of the salary earned to pay the tax due on a writer?s annual revenue. Recent legislation regulates umbrella companies outside the sphere of managed services companies and are taxed accordingly.

Considerable fines are levied on people trying to avoid the IR35 process. Some freelancers may fall outside the code reducing tax burdens on some income. Check with the IR35 system to see if you have contracts that qualify as outside IR35. An umbrella company will take over the burden of paperwork and tax preparation for freelance workers and contractors.

Using an umbrella company reduces the risk of tax errors, and the company will have knowledge of tax breaks that favor clients. For contractors with short-term work an umbrella company avoids the necessity of setting up a limited company that will not last.

Services Provided by Umbrella Companies

Compliance with IR35 regulations

Timesheet Processing

National Insurance Services

Tax Preparation

Submission of Annual Forms

Bank Deposit Payroll

Invoicing

Payment Tracking

Employee Benefits

Umbrella companies are useful for freelancers and contractors seeking to establish a solid reputation in a chosen field. As part of an umbrella company you are considered an employee without the constraints of traditional employment and with all the benefits of self-employment.

Source: http://www.bellefonteave.com/2012/08/17/umbrella-companies-freelance-workers-and-contractors/?utm_source=rss&utm_medium=rss&utm_campaign=umbrella-companies-freelance-workers-and-contractors

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