Our Umbrella service is the sole activity of our sister company, L & S Accounting Firm Umbrella Ltd.
What are Umbrella Services?
To provide umbrella services, an umbrella company acts as an employer to agency contractors who work under a fixed term contract assignment, usually through a recruitment employment agency in the United Kingdom. Recruitment agencies issue contracts to a limited company as the agency liability would be reduced. It issues invoices to the recruitment agency (or client) and, when payment of the invoice is made, will typically pay the contractor through PAYE with the added benefit of offsetting some of the income through claiming expenses such as travel, meals, and accommodation.
Umbrella companies have become more prevalent in the UK since the British government introduced the “IR35” legislation that creates tests to determine employment status and ability to make use of small company tax reliefs. According to criteria set out by the UK Department for Business, Innovation & Skills, there are an estimated 4 million temporary workers in the UK, of whom 1.56 million are “classed as being in a management or senior official role, a professional occupation or an associate professional and technical occupation.” It is estimated that 14% of the UK’s professional contractors are currently managing their business by working through an umbrella company.
The agency, if involved, performs the recruitment process on behalf of the client. Some agencies will provide a PAYE scheme as part of their offer. This alleviates the requirement for the umbrella company but requires additional capability within the organization including professional accountants and adherence to fiscal laws. Most agencies elect to utilize an umbrella company.The contractor or employee of the umbrella company completes the actual work, completes a timesheet and submits this (typically via fax or secure web portal) along with any expense claims to the umbrella company.
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As an employee of an Umbrella Company you may be entitled to claim assignment related contractor expenses, if you engage in a number of assignments, based at different workplaces, during a single period of employment. If you know you will only work on a single assignment during your employment your workplace automatically meets HMRC’s definition of a permanent workplace and therefore travel and accommodation expense claims are not permitted.