Umbrella Company Myths
The world of contracting can appear confusing at times – what with some ‘umbrella companies’ promising 90% take home and others just putting out confusing information.
As one of the UK’s most popular and trusted Umbrella Companies we’re here to put some of the myths surrounding Umbrella Companies straight once and for all.
MYTH – I’m Self Employed through an Umbrella Company.
FACT – If you are paid via an Umbrella Company, you are employed by that company. There are many advantages to this such as access to statutory benefits (such as Sick & Maternity/Paternity pay) and one continuous employment across multiple assignments, rather than multiple short jobs (and lots of P45s). As well as making your tax easier to manage, this can also make applying for finance (credit cards/mobile phones etc.) easier due to the nature of the employment lengths.
MYTH – The more you pay, the better the service.
FACT – Ultimately this comes down to personal preference. At the heart of every Umbrella Company is PAYE, no one Umbrella can change HMRC’s rules. What you need to consider above all is the service you receive from the Umbrella you choose.
With our standard charge at £15 per week, NASA is one of the lowest cost Umbrellas on the market. Compliance and customer service are very much at the forefront of what we do regardless. Our teams are a friendly bunch and will always go the extra mile to help.
MYTH – I can claim all of my expenses back tax free.
FACT – HMRC introduced legislation in April 2016 that removed the ability to claim Travel & Subsistence claims for anyone who is under the Supervision, Direction OR Control in HOW they do their work.
To claim expenses, the umbrella must have a robust process to assess you for SDC. Where it can be shown that you are not under SDC you may claim expenses (either mileage or fixed costs). Nasa will be happy to discuss your working practices and advise whether you may be able to claim expenses or not.
Expenses that are repaid in full by an end client (re-billable) are unaffected by this legislation.
MYTH – I can claim all my expenses at the end of the year. FACT – In short, this is not fully accurate. Any claims such as travel to and from work, or meals whilst at work can only be claimed if you are not under SDC. Some umbrella companies will advise that you can claim these at the end of the year – either through a P87 or tax return. We’d recommend you check the small print as it will invariably state that HMRC have the final say, in our experience HMRC rarely pay expenses claimed in this manner.
Some claims can be made at the end of the year such as professional subscriptions or other non-travel/meal costs you incur in your duties.
MYTH – I can earn significantly more through some Umbrella Companies than others.
FACT – If operating correctly and legally, all Umbrella Companies in the UK are required to abide by the same legislation and therefore the way they calculate Tax and National Insurance will be the same. Any company promising significantly higher take home pay than others is likely operating a scheme that could leave you firmly in the sights of HMRC for unpaid tax. HMRC regularly challenge and win these schemes, leaving contractors with £1000’s in fines & unpaid taxes. Recent wins in the Supreme Courts & the public hunger to tackle tax avoidance only make these cases easier to win.
The best way to confirm that an Umbrella Company is compliant is to look at their accreditations. For example, NASA Group are regularly audited and approved by independent industry body - Professional Passport. We also adhere to the FCSA code and are currently an associate member.
To discuss your options and to see which is best suited for you, our myth busters are happy to help: (0117) 929 7683 or firstname.lastname@example.org