Becoming an Umbrella Company Employee is an option between PAYE and a Limited Company. It is an operating structure set up by a third party. A contractor would become an employee of this Umbrella company, and they would submit their timesheets to them for processing. The Umbrella company will, in turn, invoice the end client or agency for the work done by the worker.
The Umbrella Company will then pay the employee (less the Umbrella fee) their earnings as a PAYE salary with all the tax deducted.
- It provides little control as the Contractor is an employee of the Umbrella Company
- Earnings and taxation are similar to a straightforward PAYE scheme. As of 6th April 2016 you are unable to claim Travel and Subsistence expenses through this solution, there is a limited scope for claiming other expenses beyond this or reclaiming VAT on purchases
- Flexibility is marginally better than being a direct employee, but is still limited to the employers’ operating practices, and there is no scope to grow or diversify
- There is just a shade less administrative work to do than running your own company – up to 40 minutes a month.