Over the last few years the use of Umbrella Companies has become more popular within the contracting market.

Umbrella Companies are popular because they take the hassle out of tax and administration responsibilities. You simply register online with your chosen Umbrella service provider. To complete your registration you will need to send in a copy of your passport and visa and your P45 or P46.

Once you are a registered client, you simply log your timesheets online and send in expense claim forms. It’s that simple. Your Umbrella Company takes care of all the administration including processing your payment after making the correct deductions and paying the correct taxes to HMRC. This leaves you free to focus on finding those opportunities and doing the work.

But how can you be sure you are entrusting your hard earned money to the right Umbrella Company?

Deon Smit, 1st Contact Umbrella Manager, offers these 10 tips for selecting the right Umbrella Company to partner with:

Experience

Only consider an Umbrella Company that has been in operation for a number of years. 1st Contact has been assisting contractors with payroll services since 1996. Be wary of any new companies as you run the risk of losing all your money to a fly-by-night operator.

Reputation

It’s all good and well if a company has been operating for years; but what if they’ve been operating badly? Scour the net for blogs and information and speak to longer established contractors about their experiences with Umbrella Companies – the good, the bad and the ugly.

Easy online system

Make sure that your Umbrella service provider has a simple online system that you can easily manage. There’s no point in using an umbrella provider to avoid admin, only to have to spend hours figuring out their complicated registration and submission systems.

Personal service

As important as an online system is, make sure that when you need to speak to a real, live person, one is available to you. 1st Contact Umbrella provides a free consultation with a professional consultant and their telephone lines are open from 8am to 5pm Monday to Friday. They also make it their business to answer all payroll related email queries within 3 working hours.

Fee structure

It is extremely important that you establish upfront that there are no joining fees and no exit fees. Ask the Umbrella Company to provide you with a full schedule of fees to ensure that you aren’t overcharged.

Insurance

What happens if your service provider goes bankrupt? Always ask about the insurance policy to be 100% sure that you will receive your money, no matter what. Your Umbrella Company should have public liability, employers’ liability, and professional indemnity insurance cover.

Expense policy

Some companies may claim an extensive claims policy, but the conditions attached are so extreme that the likelihood of you actually claiming is pretty slim. Do your research and ask as many questions as possible. Avoid any company that states that you don’t need to prove your expense claims – if HMRC does query your expenses and you cannot provide the necessary receipts, the tax liability could fall on you.

Employee benefits

Does your Umbrella Company give you the option of employee benefits such as sick leave and maternity leave? Well established companies like 1st Contact Umbrella can offer you fantastic employee benefits while you enjoy the freedom of working for yourself.

Payment dates

Does the scheme have fixed payment dates you can rely on? Be sure to find out what the payment methods and schedules are and make sure the answers are not vague. You want to know exactly what their payment policy is, so that you have recourse should the timelines not be met.

Relocation costs

Lastly, find out about other benefits. For instance, with 1st Contact Umbrella you can claim relocation costs if they are your first employer when you arrive in the UK. You could be in a position to claim the costs of your flights, shipping, 6 weeks’ accommodation. In fact, up to £8000 could be claimed to give you a tax benefit and in turn increase you net pay. Terms and conditions do apply, but this is a fantastic benefit you are not likely to see elsewhere.

We hope these tips have been of use to you. If you have any questions related to contracting in the UK, Umbrella Companies or the setting up of a Limited Company, visit www.1stcontact-umbrella.com or speak to an experienced and professional consultant by calling 0808 178 8634.

1st Contact Umbrella has successfully assisted over 100,000 clients with our no-hassle, efficient payroll service.

The Chancellor of the Exchequer presented his Budget to Parliament on the 22nd of June 2010 – a budget which brought spending cuts and tax rises, which according to the Chancellor are necessary in order to deal with the “economic inheritance” the new government faces and help to speed up economic recovery for the UK.

For businesses and their owners, the budget brought with it some good news and some bad news, as summarised below:

Corporation tax

Small businesses (companies with profits of less than £300,000 per annum) will benefit from a reduction in the Small Profits Rate of corporation tax, decreasing from 21% to 20% as of April 2011.

The standard rate of corporation tax will also decrease to 27% from April 2011. This decrease will be followed by a 1% annual reduction every year over the next 3 years, to reach 24% by April 2014.

VAT

The standard rate of VAT is to increase to 20% from the 4th of January 2011, while sectoral rates for the Flat Rate scheme will increase at the same time. There will be no change to zero-rated and exempt items.

Capital gains tax

The annual exemption of £10,100 will remain unchanged for the foreseeable future. The tax rate for basic rate payers remains at 18%, while the rate for higher rate taxpayers increases from 18% to 28% from midnight 22 June 2010. A further change is that entrepreneurs’ relief at 10% will be extended from the first £2 million of gains to the first £5 million.

Income tax

There will be a £1,000 increase in Personal Allowance for tax to £7,475 with effect from April 2011, while the higher tax/NI rates will kick in sooner to offset the Personal Allowance increase for higher earners.

National Insurance

The increase in employers’ NI contributions will not go ahead as planned. Instead, the threshold for employers’ NI contributions will rise by £21 per week above inflation.

Small businesses in certain areas, set up over the next 3 years, will be exempt from the first £5k of employer’s NI on up to 10 employees’ wages.

For advice related to your small business’ tax issues, speak to a 1st Contact finance consultant by calling 080 8141 1657 or email info@sablewealth.com.

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