Umbrella Companies

Umbrella companies, such as Parasol, allow contractors to benefit from being legally tax-efficient, without having to worry about the IR35 contractors’ tax (your status is “employed” so IR35 cannot apply).  Many of the tax efficiencies that an umbrella company provides come from the genuine business expenses allowances that can be offset against tax which are directly negotiated with and agree by HM Revenue and Customs.  The mechanism that allows this to be organised on your behalf occurs as the umbrella is not obliged to report every single detail (travel, subsistence, etc) on a tax return and can “dispense” with much of the paperwork, hence “dispensations”.

Umbrella companies employ the contractor directly as a “flexible employee” – they calculate and deduct tax and National Insurance contributions at source.  This means the contractor works correctly and according to the rules laid down by HM Revenue and Customs for employed workers.

Parasol
Administering a limited company could be the right choice if you have complex financial affairs, multiple income streams or because of specific advice from an accountant.  Incorporating and running your own company may also lead to higher net returns after the deduction of taxes.  However, it includes responsibilities that mean you are not always free to get on with the work you are good at and enjoy…. it generally means the following: 

  • You are a director of your own company and need to keep Companies House informed of your tax and legal status
  • You will need to pay for the services of a reliable accountant
  • You must produce detailed accounts, invoicing and VAT records
  • You will be responsible for submitting and paying accurate corporation tax returns
  • You must ensure that you conduct regular IR35 reviews to ensure you are on the correct side of the tax law
  • You will be required to respond to communications from accountants / HMRC / Companies House etc
  • You will be responsible for invoicing the agent  
  • You will need to run a company bank account
  • You must ensure that all documents / returns are filed in good time to avoid late filing penalties  
  • You will be required to complete an annual self assessment form to declare any dividends received to the HMRC and pay any extra tax liabilities due on these dividends each year and estimated amounts throughout the following year.

Parasol, as a Professional Employment Services specialist, provides its comprehensive NetpayXtra employment service to eliminate the pitfalls and administrative burdens of running a limited company.

New Contractor enquiries:
Tel:  0800 583 6000
enquiry@parasolgroup.co.uk



 

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