Umbrella Companies for Contractors

Umbrella companies for contractors and freelancers are companies that allow either contractors or freelancers to become part of their company, registering them as company employees. The advantages that a contractor or freelancer receives by being part of one of these Umbrellas is that they can make tax claims against their expenses which would not be permitted if they had remained as just self-employed. Although this can mean a great deal of extra money for any contractor, there are other benefits associated with becoming part of an umbrella company and it is often for those benefits that a contractor will join an umbrella rather than establishing themselves as a limited company. If a contractor opted to become a limited company, they would also be entitled to make claims for expenses and possibly even more claims than they can as an employee of an umbrella company but becoming a limited company requires that the contractor would be faced with more administrative tasks than they already may have. Administrative tasks and paperwork are probably the most disliked part of a contractor’s work and so any steps that can be taken to reduce those tasks are always welcome. With being part of an umbrella company, just like any other company, it is the responsibility of the employer to pay wages which means that the umbrella company will pay the contractor’s workers once the contractor provides the umbrella company with the weekly worksheets. This relieves the contractor of a large part of their administrative duties but the umbrella company, as the employer, does more than that as it will also create any relevant invoices on behalf of the contractor and make collections on money related to those invoices. This would really only leave the contractor responsible for paying the umbrella any relative fees but that is also taken care of as the umbrella company will take out their agreed fees before placing a contractor’s money into their account. Of course this does mean though that the contractor or freelancer will have to provide the umbrella company with the bank account details that they wish for any money from invoices to be placed in. As mentioned, if a contractor were to register themselves as a limited company they would be able to also make claims for expenses but ny doing so, the contractor will still be responsible for paying their workers, raising their own invoices and making collections against those invoices. Being a registered limited company will also require that additional paperwork is also completed and kept up to date. There are of course fees related to joining an umbrella company but those fees are usually less than the contractor will receive by being allowed to claim for expenses and is almost certainly cheaper than it would be to hire their own accountant to take care of their administrative tasks. The benefits that an umbrella company can offer a contractor are not limited to UK contractors as there are also benefits that an offshore contractor can also enjoy.