Contractors find using an umbrella company simple. Once the contractor has signed up, which can often be done online or over the telephone, and negotiated their contract with the agency or client, they hand over responsibility to the company's management team. The umbrella company will get the contract paperwork signed by both parties, so the contractor can start work secure in the knowledge a contract is in place. Then each week, or month, the contractor completes a timesheet for the client to authorize before forwarding it to the company online, by fax or post.
The company will invoice the agency or client for the correct amount, chasing for payment if necessary. Once the company has been paid, it will pay the contractor a salary after deduction of the company's fees, income tax and National Insurance Contributions, which the umbrella pays direct to HMRC. Because the contractor can claim travel and subsistence expenses, they pay less tax and take home more of their gross fees.
In addition to this, there are several benefits which you will get from a Contractor Umbrella Company. Personalized attention is the major benefit that a good umbrella service delivers to their clients. Instead of getting access to an overworked and bombarded account manager prone to mistakes, successful umbrella companies work to ensure that each account manager can handle a case as if it is his only one. Experienced accountants who have years of field practice under their belts knows how to help a business reach its full potential with regards to efficiency and the claiming of expenses.
Thus, contractor umbrella companies are a popular trading solution for many contractors, particularly those caught inside IR35.When choosing an umbrella company to use for your freelance business there are a number of things to keep in mind. Many companies use flashy advertising gimmicks which can be misleading and they may even make false promises, so it's important to get as much information about the company as you can.
Contractors are often introduced to umbrella companies offered through their agency. Be aware that these companies may be partners of the agency who will receive referral commissions for recommending certain companies. More often than not they will not be the most efficient company for you so it's important to research the broad spectrum of umbrella companies out there.
Ask the umbrella company for client testimonials and references. Word of mouth is always a powerful statement about a company, so ask colleagues and friends for referrals. More than likely, they will have plenty to tell you about both good and bad umbrella companies, so use their experiences to your advantage.