5 Myths About Umbrella Companies

5 Myths About Umbrella Companies

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Its important for contractors, freelancer and temporary workers to be aware of some the most common misconceptions surrounding PAYE umbrella companies. There are some unscrupulous providers out there that state they can offer more money, more expenses and less tax; however the truth of the matter is; the only difference between Umbrella Companies are a) their fees and b) their service levels.
Here are 5 myths to look out for;
1>You pay less tax with some umbrella companies compared to others This is completely untrue. It doesnt matter which umbrella company you join, you will have to pay statutory tax amounts set by HMRC.

2> If my Umbrella Company has a dispensation, I dont need to keep receipts A dispensation essentially lessens the amount of administration for you, the Umbrella Company and HMRC as you wont be required to keep sending travel and subsistence receipts into your umbrella company every week. However, YOU MUST KEEP RECEIPTS for your own records in case HMRC request evidence that you actually incurred the expense.

3>I can claim the maximum allowances offered by my umbrella company Its likely that your umbrella companys dispensation will allow you to claim up to a certain limit for subsistence (food and drink) and accommodation, however that does not mean that you can claim the maximum allowance every single day. E.g. If the umbrella company allows you to claim up to 14 per day, you may actually only incur 8 a day, thus you would only claim 8 and not the full 14.

4>I can still claim expenses even if I anticipate going back into permanent work This statement is false. As soon as you anticipate that you will be working on one assignment (or that it may be your last assignment) your right to claim travel and subsistence will cease. This is because your workplace will no longer be deemed as being temporary.

5>I can avoid the 24 month rule by changing Umbrella Company The 24 month rule cannot be avoided by simply changing umbrella companies. As soon as you anticipate that your contract will run over 24 months youre right to claim travel and subsistence will cease you cannot simply change your Umbrella Company to avoid this.
If you want choose a reputable, well known umbrella company with a contractor calculator and IR35 services, the best place to look is Umbrella detective.com. They review over 100 umbrella companies on service, price and also on what other contractors say.

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For more information on Umbrella companies including Contractor calculator and IR35 visit our website.



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