Frequently Asked Questions
A Genuine umbrella company employees are able to claim legitimate business expenses (subject to company expense policy and current legislation) which are reimbursed tax and National Insurance (NI) free.
Remember that any reputable umbrella company should adhere to the following principles:
- You should become an employee of the umbrella company and have a contract of employment.
- They should invoice all work, chase and collect payment and deduct tax and NI at source. Any legitimate business expenses incurred should also be reimbursed tax and NI free.
- A caution about legitimate business expenses; having a “dispensation” (a letter from the tax man) doesn’t mean you shouldn’t keep your receipts or claim for anything you haven’t bought. If you aren’t required to send all the receipts for your claim, you still need to keep hold of them as HMRC could audit you at any time.
We use the term contractor to describe a person working on a temporary basis for a client, usually having been placed there by a recruitment agency.
Many contractors call themselves consultants or freelancers and in some industries, they may be termed flexible or contingent workers or interims. Typically, they are brought in to work on a specific project for a set period of time being paid a daily rate, or to cover a permanent employee’s period of absence e.g. maternity leave.
IR35 is a tax legislation that seeks to tax contractors, consultants and freelancers the same as if they are employed by the end client themselves.
Previously, small single person companies were used to reduce the amount of tax paid. However, HMRC viewed this as disguised employment and tax avoidance, so introduced IR35 in response. Since its implementation, it has been argued that small companies should be able to trade as if outside of IR35 in order to make tax efficient dividend payments.
Unlike NumberMill, certain umbrella companies do still use dividend payment systems and offer IR35 insurance or IR35 friendly assignments. But it is important to remember that contractors in such schemes risk having to pay back underpaid tax going back years. It’s just not worth it in our view.
You may have also seen heard about “S660a” in relation to IR35. This relates to the tax legislation used to prevent the payment of spouse dividends through a company route, which is viewed as avoidance by HMRC. Some schemes still offer this trading arrangement, but employing a partner, wife or husband who does not contribute to the business is incredibly risky.
NumberMill umbrella and IR35
When you join NumberMill umbrella, you become a PAYE employee and pay your tax and NI contributions through normal HMRC channels, without being affected in any way by IR35.
Use our online calculators to see what your take home pay and expenses could be as a NumberMill employee. With us, you can be safe in the knowledge that everything is above board and you are fully HMRC compliant
If you choose to set up your own Limited Company you do need to ensure that you meet the requirements of IR35.
IR35 is a complex piece of legislation, that predominantly focuses on assessing if a contractor is suitable to run a Limited company. The tests look at 3 things; 1) Control, 2) Personal Service 3) Mutuality of Obligation although these are good starting points but you should also consider your working practices and contracts.
You should also consider the HMRC Business Entity Tests. NumberMill do offer a detailed review, please contact the team for more information. NumberMill have qualified experts who can help you understand if you are suitable and we can assist you as accountants, should you choose to engage with our accountancy services, we will provide you with an IR35 guide and talk through all options available.”
Contractor accounting services are specialist. If you had a heart problem you would go to a cardiologist, if you are a contractor you need to be advised by a professionally qualified expert who understands the contractor market place. Many high street accountants do not know enough about the agency market place eg. Agency Worker Regulations or IR35,
This legislation Section 44 Finance Act 2014, again is complex and very wide. However put simply, it suggests that if you are a contractor working via an agency and you are in any way, directed, supervised or controlled then you should not be self employed. In which case, we suggest that you go NumberMill umbrella
As a NumberMill employee, you get a contract of employment, which means all your admin, employment rights and insurance are fully taken care of and you pay your tax and NI contributions through the normal HMRC channels, without having to worry about IR35 regulations.
You are also entitled to the same statutory benefits as a permanent employee, including sick pay, maternity and paternity pay as well as adoption pay.
NumberMill has an expert team of support advisors who are committed to providing the very best help and support to all our employees.
Whatever enquiry you have, whether it is a basic question about our online portal and timesheets or a more complicated query about tax and payments, a dedicated advisor will strive to resolve any concerns that you have as quickly and efficiently as possible.
NumberMill has a simple-to-use online PAYE calculator that can help you to work out what your net take home pay and expenses could be as one of our employees.
As soon as we receive payment from the agency or client that you are on assignment with, we will match this up with your online timesheets before processing them. We will then take into account any expenses, deductions or allowances, calculate your tax and NI contributions and make payments to HMRC on your behalf on a PAYE basis. Then, the team will transfer the net amount into your bank account. We offer FastPay as standard.