What's the point of an "umbrella" company

SnowyOwl_2

Hello all

I've started working with an agency on an hourly paid contract about 30 miles away from where I live. The agency has put me in contact with an umbrella company telling me that it would be more lucrative for me to be paid through them.

The contract I have will likely only be for around 37 hours a week and for a few weeks duration. Also I am not self-employed.

I understand that my mileage costs and lunch costs will become part of my non-taxable allowance so that would be a plus,. They would pay me an "enhanced" rate to cover holiday pay while the agency would pay off accrued holiday when the contract ceases or when I have time off. However the umbrella company obviously isn't doing this for love, and the agency isn't a charity for hourly paid workers....so that only leaves me to be paying them a fee out of what I earn.

I am sceptical...is there really any benefit to be gained in joining the umbrella company?

sexki11en

If you claim all the expenses you realistically can, then yes, there is a benefit to you. You will pay much less in tax and NI contributions and be anything between £15 - £80 a week better off.

You should have had a full explanation of how this works from the agency. They all work slightly differently, depending on the UC.

SK x

Hammyman

Unless you're earning over £350 a week AND can claim at least 30% of that in expenses, then it isn't. And that is from NOVA, an umbrella company for lorry drivers.

Basically doing it that way gets the agency out of paying employers NI and absolves them of employers legal duties to employees usually for paying agency workers an extra quid an hour.

alanshave

The above is all correct - it can be of benefit to you but personally I would speak to a couple of providers that offer the PAYE Umbrella service and explain your situation to them, ie. pay rate + mileage etc.

Any responsible payment provider should tell you if it will actually benefit you.

Can I ask one question?

Did the agency tell you which payment provider you would be using or did they give you a choice?

Russe11

Be very careful, I wouldn't bother using a Umbrella company, past experience has found them to be a compleate joke,(might be some good ones out there though). Some work with agencies to basically make more money. Unless I was forced to I would never ever use one again.

I'm not sure of the exact amounts , but I think you would need to earn at least £8.5 per hour, but only really has its plus points if you are on a decent hourly rate and have some decent expenses to offset.

The are used a lot in the IT sector which make sense if you are on £30-150 a hour, but working as a labourer on £8 a hour does not make sense.

SnowyOwl_2

alanshave wrote: »

The above is all correct - it can be of benefit to you but personally I would speak to a couple of providers that offer the PAYE Umbrella service and explain your situation to them, ie. pay rate + mileage etc.

Any responsible payment provider should tell you if it will actually benefit you.

Can I ask one question?

Did the agency tell you which payment provider you would be using or did they give you a choice?

The agency put me in touch with one payment provider who subsequently contacted me and started the hard sell.

I am puzzled how petrol and lunch expenses can be come non-taxable items when being paid through the umbrella company, but are not when working through the agency. Surely such expenses are subject to tax laws and companies themselves can't decide what is taxable and what isn't. The umbrella company assured me that I'd be PAYE etc just the same as if being paid by the agency.

My hourly rate is at the thinner edge of the wedge anyway so based on opinions expressed in this thread it's of no advantage to me to go through the umbrella company. It irritates me enough that the agency is on a healthy commission with every hour I work....and then suddenly some umbrella company I'd never heard of is also going to make money out of me too and they both sell it to me like it's for my benefit. It hums like a crock of sh*t...

omen666

Would also check to see if the recommended company owns the umbrella seems a lot of agencies doing this now

purplepardalis

The umbrella company I last used charged me £130 to use their services! I hated doing it even though it was for a short time. You do get to claim back the tax on that fee as well but it still felt like a rip off to me.

Hammyman

SnowyOwl wrote: »

The agency put me in touch with one payment provider who subsequently contacted me and started the hard sell.

I am puzzled how petrol and lunch expenses can be come non-taxable items when being paid through the umbrella company, but are not when working through the agency. Surely such expenses are subject to tax laws and companies themselves can't decide what is taxable and what isn't. The umbrella company assured me that I'd be PAYE etc just the same as if being paid by the agency.

There's the rub. Basically the tax rules are that if you have different places of work and are not commuting to the same place for more than 3 months consecutively, it is classed as a temporary place of work and you can claim mileage at HMRC rates. Now here's the thing: YOU CAN ALSO DO THAT ON PAYE by completing a P87 Expenses in Employment and I did for years on end as I did agency driving as a lorry driver where working at the same place three weeks in a row was uncommon, let alone 3 months.

The meal allowance is a different kettle of fish. You can only claim SUBSISTENCE ALLOWANCE if you stay away from home overnight. A company can get an allowance for meals for their employees however it is done by an individual arrangement with the local tax office, i.e the company state their case and the tax office say yay or nay and an amount if its a yay.

SnowyOwl_2

Hammyman wrote: »

There's the rub. Basically the tax rules are that if you have different places of work and are not commuting to the same place for more than 3 months consecutively, it is classed as a temporary place of work and you can claim mileage at HMRC rates. Now here's the thing: YOU CAN ALSO DO THAT ON PAYE by completing a P87 Expenses in Employment and I did for years on end as I did agency driving as a lorry driver where working at the same place three weeks in a row was uncommon, let alone 3 months.

The meal allowance is a different kettle of fish. You can only claim SUBSISTENCE ALLOWANCE if you stay away from home overnight. A company can get an allowance for meals for their employees however it is done by an individual arrangement with the local tax office, i.e the company state their case and the tax office say yay or nay and an amount if its a yay.

Thank you Hammyman, the points you make are very interesting and do seem to address my confusion. I'm going to turn the umbrella people down and just stick with the agency but will investigate the P87 situation.

sharkie

Russe11 wrote: »

The are used a lot in the IT sector which make sense if you are on £30-150 a hour, but working as a labourer on £8 a hour does not make sense.

Here in London we can get IT people for desktop support with years of experience for £10.20 p/h

Not only do the allowances vary per agency, but also per agent for that agency. Lazy agents and accountants just do the minimum.

There is also apparently breakfast and evening meal allowance, besides the lunch one, but are suppose to start early and finish late.

Our wealthier, married contractors tend be be a limited company, while the poorer paid and single tend to be umbrella.

Various people ave now left, but I belive one guy got from umbrella ended up paying a total of 19% ni & tax on gross and one company guy paying out 14% ni & tax. End of the day it depends on your circumstances and/or how much you lie on the form:)