What's the point of an "umbrella" company

SteProud

SnowyOwl wrote: »

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.

Hi there

I work for an umbrella company so I am not impartial but can offer a bit of info.

Most of the posters above are correct, the average hourly rate of the contractors who work via us ( and there are currently 9,000 of them) are on an average of £35 per hour.

Your agency can not force you to work via any particular umbrella company, you are free to choose, and you should be able to leave the umbrella company at any time so avoid any that tie you to a notice period or charge a leaving fee.

Also avoid any that say they are HMRC approved, that simply doesn't not happen. HMRC will endorse no one.

Hammyman is not quite right re expenses. You are entitled to claim travel and subsistence expenses for up to 2 years, or until you know you will be at the same site for two years. It then doesn't count as a temporary place of work.

You can claim your mileage and subsistence costs (lunch etc) but only claim for what you spend and always keep the reciepts. Some umbrella companies will tell you they have a dispensation from HMRC and that you don't need reciepts. This is not true. The dispensation just means they don't have to show them to HMRC to process them. HMRC can ask you to present them at any time so always keep them safe.

You will not see the money you have spent as expenses back as cash, the amount is deducted from your gross pay before income tax is deducted. Effectively you are paying tax on less of your income.

Working via your agency's PAYE is easier but you can't claim expenses and you might not have the required insurance in place so it is worth asking.

You won't have all the employee rights that comes with working under a good umbrella company either. A good umbrella company will have a contract of employment with you so in the eyes of the law you are legally their employee. They take responsibility for ensuring you have all the rights that all employees should have.

If you would like me to run a pay calculation for you with a round about figure so you can see what sort of take home pay you can expect working with an umbrella I'd be happy to do it. Just PM me.

I can also send you a list of questions to ask an umbrella comnpany before you work with them.

SteProud

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.

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...

You can claim expenses working via an umbrella because you should have a contract of employment in place with a good umbrella company. This means you legally become their employee so the site you are working on (which isn't the umbrellas head office) becomes a temporary place of work.

Good umbrella companies will also guarantee your hours but usually at only national minimum wage.

You should also have exactly the same employee rights and access to HR support as I do sat here in the office.

RedSoleShoes

One thing you should note from going down the umbrella route, your gross income will look a lot lower on your 2010/11 P60 so if you are thinking of applying for a mortgage or remortgage in the next tax year, your affordability assesment will be affected.