What is the main benefit of an umbrella company
I've had little to do with umbrella companies but a family member has been offered a year's interim post at a large organisation and can either run via the agency as an employee or arrange an umbrella company (UC) appointment.
From my quick reading the UC employs him and, because the arrangement falls under IR35, uses any expenses he wants to claim and their own admin fee to reduce the deemed salary upon which he suffers PAYE. Under the agency employment route I guess he'll be paid as normal but could claim the same expenses on his tax return to gain the tax relief.
So, simplistically, in addition to what appears a large % to the agency (compared to the UC fee) and the NI saving from the reduced salary under the UC, he appears to be far better off with the UC arrangement.
I haven't worked out the holiday pay difference yet as I can't quite follow what happens under the UC but from what I read the hourly rate he gets from the UC during his working weeks includes holiday pay, whereas the agency pay him throughout the entire year at work or on holiday.
I might have got the wrong end of several sticks here but any pointers would be appreciated.
- Fines for filing 12 months of FPS on one submission 177 2
- Gave wrong info to client about tax due 520 19
- Base value unavailable re. Capital Gain 172 2
- Old CGT loss 184 3
- Gov.UK = NOT OK! 112 3
- Paper tax return 129 4
- Start up allowance? 361 12
- Will I need to resign? 136 1
- Invest in ''buy to let'' property 1,341 41
- Penalty for late PAYE registration? 234 3
- AIA or IFA 445 7
- Surely not? 440 10
- Batch input of data to Xero - is there an app? 631 9
- Running two businesses from the same premises 366 3
- Working out private usage for a Taxi Driver? 355 7
- Late Registration for VAT 355 11
- When do consolidated/group accounts needs preparing? 268 5
- Nominal Ledger 360 10
- Share structures 147 5
- It’s our staff Christmas party this week, what did you do for your firm? 2,158 19