Umbrella companies are companies that can be hired by other companies to do many of their administration tasks for them. Most of the companies that use an Umbrella Company are contractors that need the services of freelancers quite a lot. The umbrella companies will take care of all sub-contracting including the paying of taxes as well as salaries. This allows the contractors to concentrate on the business they have in hand and only need to pass the umbrella service the time-sheets for its workers. Most of these umbrella companies will also take care of any invoicing and will even collect the payments.
Among their other tasks an umbrella will also make any NI payments that are due and of course keep records of all the financial transactions they make on behalf of any of the companies that they work for. Perhaps the biggest advantage of using an umbrella company is that a contractor is free from any admin tasks and can therefore either use their time on a current project or alternatively, use it to find more work, allowing them to be fully productive instead of being tied up with paperwork most of the day. Although these umbrellas are working for a contractor, they will also ensure that all a worker’s rights are adhered to. The use of umbrella companies has started to become popular and this is perhaps in part due to the fact that a suitable umbrella can easily be found online and an agreement quickly reached.
Of course, as the umbrella will be collecting for all the contractor’s invoices, it is easy for them to take out their pre-arranged fee before either handing to the contractor the remainder or placing it in their account. The Umbrella companies are well aware of all existing tax regulations and are recognized by the tax collection authorities and so a contractor that uses an umbrella company can rest assured that all their required tax payments are not just made but are made on time. Although the umbrella companies do of course charge a fee, it will almost certainly be less than a contractor would have to pay if they were to hire a professional administrator to carry out all these tasks.
Although many contractors are already making use of umbrella facilities, most of those that are, are contractors that work in the country but umbrellas can also provide similar services to offshore contractors if required. Just as with a contractor that is not offshore, an umbrella company will take care of all the administration requirements including any taxes due but as an offshore contractor, less taxes are required to be paid, the umbrella company’s fees are often less also which means an offshore contractor can reasonably expect to receive 90% of their total income.
Any umbrella company will use professional administrators and will often place just one administrator to a contractor which means that the contractor has an easy point of contact and can easily receive information on any current financial situation.