Whether you require Umbrella PAYE payroll or help with IR35 determination, JZK Accountants can help.
With constant changing HMRC legislation it is important to know that JZK Accountants has a very experience team to deal with compliance.
Working through JZK Accountants means that you’re in safe hands.
What is an umbrella company?
The umbrella company (also known as PAYE umbrella) acts as an intermediary between the contractor and the recruitment agency (or the end client).
The payroll is handled by umbrella companies through PAYE — which deduct relevant taxes, national insurance contributions, and pensions before paying the contractor.
Umbrella companies have become more common in the UK, especially leading up to the government’s implementation of IR35 legislation.
It is extremely crucial to choose an umbrella company that is compliant with tax obligations. Non-compliance could land you in serious trouble with the HMRC in the UK.
According to research by the UK government, the most common sectors working through umbrella companies are temporary employment agencies, consultancies, and business support services.
How is the IR35 legislation related to umbrella companies?
The IR35 legislation was introduced in the UK to bring “disguised employees” under the government’s tax radar by making the employing company liable for ensuring proper contractor classification and reporting of income.
The government was concerned that contractors would often use intermediary companies to receive payments from their clients in order to avoid tax, or taxable income was going unreported. In an effort to reduce the chances of this, the IR35 legislation was introduced.
The UK government started issuing tests to determine employment status and contractor qualification. The new rules are set to come into effect in April 2021.
All large and medium-sized businesses will be responsible for classifying the employment status of contractors with PSCs (Personal Service Companies) and will be required to follow a new set of administrative procedures to ensure compliance.
What are the main advantages of using an umbrella company?
A report from the Association of Independent Professionals and the Self-Employed (IPSE) reveals that 34% of self-employed workers operate through an umbrella company, and we wanted to explore and explain the advantages of contracting through an umbrella company as, according to the Association of Independent Professionals and the Self-Employed (IPSE), 61% of contractors do not know or understand them.
Umbrella companies are an essential part of the contracting world, giving access to various benefits that many would consider exclusive to traditional full-time employees. The list of advantages for contractors is extensive, but here are some of our favourites:
As a contractor you can choose your assignments, when and where you want to work and the client you want to work with. As an umbrella employee you have the freedom without you having to worry about new contracts for each assignment and burdensome commitments.
You’re An Employee
Working for an umbrella means that you are classified as an employee, this gives you full employment rights, benefits, and protections including holiday pay, sick pay, maternity/paternity pay and access to HR support. These are the most common reasons why contractors use an umbrella company as opposed to their own limited company, where you simply wouldn’t get access to them.
This is particularly advantageous for new contractors and temporary workers; you don’t need to worry about setting up a limited company and having to deal with its complexities, accountants, HMRC and dissolving the company once your work is completed.
IR35 Risk Becomes Irrelevant
Working for an umbrella removes the risk of falling on the wrong side of IR35 as you are employed by the umbrella company, therefore automatically ‘inside IR35’, meaning HMRC will not come knocking on your door in years to come.
With the benefits available, we believe that working with an umbrella company is a great option for contractors and only recommend compliant and audited umbrella employers for your peace of mind.