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Hamilton Bradbury – A Life Without Paperwork
Fed up with spending time on admin and paperwork when you could be earning money contracting? Looking for an HMRC-friendly way to maximise your income? Then why not join Hamilton Bradbury Umbrella Company and enjoy all the benefits of being a PAYE employee with all the freedoms of the contracting lifestyle.
Why Choose Hamilton Bradbury Umbrella?
Because we lead the way in umbrella company innovations, offering the best rates of income retention with an incredible support team and a comprehensive range of benefits for our contractors:
There are several ways to contact us or find the answer.
a Limited Company or Umbrella Company?
What Should I Choose – a Limited Company or Umbrella Company?
That will of course depend on your current contracting situation – there are advantages and disadvantages to both – but these days a lot of contractors are looking at umbrella companies as the safer option. Firstly, for those people who are new to contracting, the umbrella company is perfect because it allows someone to be up and running without any paperwork or admin (unlike a limited company) and to see if they like the contracting lifestyle. Secondly, umbrella companies are also perfect for those contractors who are already contracting and who love working for themselves but who don’t like getting bogged down in all of the tedious admin and paperwork that comes with running your own business through a limited company. An umbrella company removes all the worries of dealing with Companies House and HMRC, and means that the contractor will never have to go through the hassle of sending out invoices and then chasing down payments, all the while offering a rate of tax that is broadly equivalent (after some generous expenses) to that paid by limited company contractors.
That’s not to say there aren’t some people who wouldn’t benefit more from working in a limited company. There are. For example, contractors on very high rates might find that limited companies offer a slightly better return when it comes to income retention. Similarly, those contractors who aren’t worried about all the extra admin and paperwork and who prefer to do it all themselves might also find a limited company preferable. However, anyone who does opt for a limited company will also need to bear in mind that umbrella companies are fully compliant with (or rather unaffected by) IR35 legislation that is the bane of most contractors’ lives. Because umbrella companies pay through PAYE and NIC’s, HMRC has made it very clear that it is not interested in pursuing contractors working through them. This in itself is another big advantage over limited companies, particularly for contractors who do a lot of work for one client.
More more information about Limited or umbrella click here
How Do Umbrella Companies Deal With Expenses?
Umbrella companies do offer a way to reduce taxable income through expenses and here at Hamilton Bradbury our specialist contractor accountants are always on hand to ensure that you get maximum benefit from the umbrella company exemptions and allowances. According to HMRC, contractors working through umbrella companies can claim expenses on anything that was ‘incurred wholly, exclusively and necessarily in performing their duties.’ However, it is important for contractors to ensure that when claiming expenses they must have been genuinely ‘incurred’ while working – other wise they could find themselves receiving a visit from the taxman and being assessed for tax avoidance.
Nevertheless, legitimate expenses claims are very useful to the umbrella company contractor and cover a wide range of allowances. Contractors who travel to and from their place of work can claim travel expenses including a mileage allowance, parking and congestion charges and / or the cost of public transport. If the place of work is a long way from the contractor’s home they are entitled to claim for the cost of a hotel (a ‘reasonable’ cost) as well as the meals they consume on the job. Clothing can be claimed for if it is protective clothing to protect the contractor’s everyday clothing and equipment can be claimed for if it is wholly for the current contract and necessary for the completion of that assignment.
Additionally, expanses can be claimed for training, but again, only if it is necessary for the completion of that particular assignment. You can also claim for subscriptions to professional bodies and societies that are relevant to your sector. The best expense allowance however is in pensions and it is here that umbrella contractors get the best perks. By investing part of their income into the umbrella company pensions scheme, which has a generous tax break, the contractor also saves a great deal of money on income tax and NIC’s.
To read how we deal with Umbrella company expenses click here
How Much Do Umbrella Companies Cost? How Does Hamilton Bradbury Compare?
Don’t trust any umbrella company that doesn’t list their fees out in the open on their website. And certainly don’t trust any umbrella company that claims to be able to ‘earn’ you more than any of the others or provide more income retention. They can’t. The whole advantage of umbrella companies (and the reason they are never at risk of compliance investigations) is that they pay through PAYE and NIC’s and are regulated by HMRC. All company umbrella vehicles offer the same rates of tax and national insurance contributions – it is in the service they provide, the admin and back room support and the management of your expenses claims that umbrella companies earn their money.
Contractor umbrella company charges should all be around a similar price point when you are doing your research and trying to decide which company to go with. Any company that is way cheaper or way more expensive should probably be avoided. Indeed many paye umbrella companies will quote an after-tax cost on their headline prices because the payments are tax deductible – don’t be fooled by this rate. And also avoid any company that charges fees as a percentage of your invoices – this could end up being really expensive.
Here at Hamilton Bradbury we think our rates are very affordable and competitive, mainly because of the market leading support and services we offer for the money, which have led to us being one of the leading PAYE umbrella companies.
At Hamilton Bradbury the fees we charge are very simple and crystal clear – £18.25 per week or £68 per month. And that’s it – no extras, nothing hidden and no joining or leaving costs whatsoever.
How Does Tax Get Paid in an Umbrella Company?
The reason that umbrella companies such as Hamilton Bradbury are proving so popular with contractors nowadays is because they offer a HMRC friendly way of minimising admin and paperwork whilst still managing to offer some decent tax advantages to the contractors they employ. A contractor joins Hamilton Bradbury or a similar umbrella company (instantly by phone or website) and then signs an employment contract with that umbrella company. They become the employers of the contractor who then goes about their contracting business as usual.
The contractor works contracts as they have always done but instead of having to fill out all the paperwork and do all the admin associated with a limited company and having to send out invoices and chase payments, all they need do now is submit a form with hours worked and expenses incurred at the end of the week. After that, the umbrella company takes care of everything (including sending the invoice and collecting the payment) before then paying the contractor via standard employee PAYE and NIC’s, deducting expenses first.
Though seen as being advantageous more for the freedom they bring to contractors and the lack of paperwork (not to mention all the employee benefits) umbrella companies also offer many tax advantages too. One of the main ones comes in the form of expenses that allow the contractor to offset significant travel and subsistence costs against their gross pay. One of these expense allowances is in the form of a very generous tax break on pensions wherein the contractor also saves a great deal of money on income tax and NIC’s. Also another tax advantage is that umbrella company contractors will never find HMRC at their doors with an IR35 investigation into tax avoidance. IR35 legislation, as well as onshore intermediaries legislation, has no relevance to contractors paying tax through an umbrella company.
How Much Would My Take-Home Pay Be?
As hundreds of thousands of contractors have already discovered, contracting through an umbrella company is the most cost effective way to work, saving you money and freeing up time to concentrate on the work itself. Our contractor calculators allow you to calculate how much your take home pay will be whilst working through our umbrella company.
What Does HMRC Think About Umbrella Companies?
Have a quick browse of contracting sites on the internet and you’ll find a lot of companies offering a lot of unbelievable rates of income retention via a number of different ‘creative’ schemes, both onshore and offshore. These are all well and good if you fancy paying less tax in the short term and then later having a number of long and invasive meetings with the taxman and an unexpected bill for money owed! If something sounds too good to be true it invariably is, which is why over the last four or five years HMRC have steadily (and regularly) closed down new formations designed to allow contractors to retain more and more of their income. Everything from Employee Benefit Trusts to various Managed Service Companies has been tried and each and every time HMRC has stepped in and shut them down leaving the people using them to be investigated for IR35 compliance.
However, the one structure that has proven itself to be rock solid in all that time (and which is consequently becoming the number one choice for contractors) is the umbrella company paye. The 2007 Managed Service Legislation clearly indicated that umbrella companies were in a different category to other structures and the legislation explicitly pointed to individuals in umbrella companies as not being affected. Since then it has become standard practice for contractors to use ‘parasol umbrella companies.’ In simple terms, IR35 is just not relevant when it comes to umbrella companies because the contractors using them are operating through PAYE and NIC’s. In other words, compliance is simply not a problem and HMRC are perfectly happy with contractors working through umbrella companies.
How Do Umbrella Companies Handle National Insurance Contributions?
When negotiating their rates with clients and agencies, contractors should bear in mind that one of the quirks of umbrella companies is that National Insurance Contributions are handled differently. As with permanent employment contractors would pay their own Employee NIC’s through their umbrella company along with PAYE. But with umbrella companies they also pay the Employers NIC as part of their assignment so rates need to be adjusted slightly to take this into account. With Employers’ NIC being calculated at 13.8% what this effectively means is where a permanent member of staff would earn £25 per hour for a job, contractors working through an umbrella company need to negotiate their rates to £28 with a built-in contractor ‘uplift.’
In effect, contractors could be offered two different rates – one that might come from the payroll of a company or a second, slightly higher rate if pay is processed through the payroll of an umbrella company. They would pay a lower rate if paid directly by a company because they would not have to pay the Employer NIC – their employer would take care of it. If they opt for the higher rate via the umbrella company however they would be paying that contribution. However that difference would be more than covered by the savings they would make through allowances and expenses working through the umbrella company.
What’s interesting when it comes to NIC’s is that if a contractor works via a limited company and ends up falling inside IR35 then because of the PAYE and NIC they would end up paying anyway it means their net pay in an umbrella company wouldn’t be that much different from a limited one. Add to that the advantages of no paperwork and admin and umbrella companies once again become the only choice!
I’m Worried About IR35. Can Your Umbrella Company Help?
In a word, yes. When it comes to umbrella companies and IR35 compliance is simply not an issue. As the government has cracked down on managed service companies, employee benefit trusts and other tax vehicles the limited company and the umbrella company have become the only two remaining choices left for contractors. And with IR35 complicating matters even further thousands of contractors are abandoning limited companies for umbrella companies every year. Why? Because IR35 compliance isn’t even questioned when it comes to an umbrella company. Legislation in 2007 placed umbrella companies in a separate category to composite structures and single person structures and whereas limited company contractors have to tread extremely carefully to avoid being caught by IR35, because umbrella company contractors pay tax through PAYE and NIC’s they are already 100% safe and compliant.
Indeed ‘compliant’ is not even the correct term – you do not need to be compliant to a regulation that doesn’t apply to you and if you are paying income tax and national insurance you cannot be accused of trying to avoid it! The same applies to the most recent legislation on onshore intermediaries employment (false employment) that was also declared to be not relevant to umbrella contractors. And whilst it wasn’t relevant to limited contractors because of a technicality, it is surely only a matter of time before it applies to them true. When it comes to compliance and the signs coming out of HMRC, umbrella companies are surely the only safe port in the coming storm.
How do Hamilton Bradbury Work With Agencies?
Umbrella companies are not just beneficial to contractors but also to recruitment agencies too. And now that significant numbers of contractors are moving over to umbrella companies it is important for agencies to understand the benefits that this way of working (and paying) can bring. At Hamilton Bradbury we value our agency partnerships as much as we do the partnerships with our contractors and that is why we set up a dedicated account manager for each of our partner agencies (and why we are on the preferred client list for hundreds of UK agencies already).
Joining up with Hamilton Bradbury brings all kinds of advantages, including the certainty of having all the contractors working for you having a clear employment status (one that is HMRC friendly too), no issues with AWR and full insurance (for Public Liability Insurance, Professional Indemnity Insurance and Employers Liability Insurance) included too. Because they steer clear of IR35, TAAR and AWR, umbrella companies are now by far the safest way for contractors to be paid and working with Hamilton Bradbury will mean no nasty surprises as the government keeps tightening the noose on contractor tax management. It also frees up time for your agency advisors and staff as we take care of payroll management for you (we handle the PAYE and NIC’s of our contractors) and provide constant back office support for your agency when it comes to expenses, breaches of contract, insurance issues and anything else that may come up.
What Do I Need To Know About Auto-Enrolment? When Will Hamilton Bradbury Implement It?
Having realised that we are all living a lot longer the coalition government recently took steps to ensure that we are also well prepared financially for this longer retirement. As such they introduced the Pensions Acts of 2008 and 2011 that completely reformed workplace pension provision. Thanks to the new legislation every single UK employer (and that will include umbrella companies employing contractors) will now have to automatically enrol all of their workers (and therefore contractors) into a workplace pension scheme (assuming they aren’t already in one) and to make contributions to that scheme mandatory. The new rules will apply to workers who are working in the UK, are at least 22 but not yet having reached the age for state pensions and who are earning in excess of the minimum earnings threshold for the relevant period (set at £8105 for 2012/13).
These provisions have been coming in gradually since the 1st October 2012 but all existing employers will have to have their auto enrolment in place by April 2017. New employers have a slightly later rollout and will have to have enrolment in place by 2018. Thankfully here at Hamilton Bradbury our auto-enrolment staging date isn’t until July 2017.
Do Umbrella Companies Insure Their Contractors? Does Hamilton Bradbury?
We can’t tell you what other umbrella contractor companies do but here at Hamilton Bradbury we like to think we’ve got our contractors covered in every direction. When we promise to make your contracting lives easier, we really mean it. And when we say that we’ll take care of all the necessary paperwork we really do mean all of it. So when it comes to things like insurance, you’ll find it’s all included in the service, at no extra cost. And we provide all of the insurance cover that a contractor is legally required to have, as well as the cover it’s just plain sensible to have too!
It doesn’t matter which contracting sector you’ll be working in, there are certain scenarios that can come along in a contracting career that each and every one of us needs to insure against. The contracting lifestyle is all about being your own boss but that also means you’re the one in the hot-seat if things ever go wrong. That’s why you need insurance that covers every angle. It’s not just good for your peace of mind, it’s also something many clients will insist on before taking on new contractors.
Firstly, we provide up to £10 million in insurance cover for Public Liability Insurance. This covers our contractors against any injuries to the general public or damage to their property when they interact with the general public, either when they are out and about, or at their own place of business. Secondly, we offer £2 million of professional indemnity insurance for contractors who offer their clients with professional advice or a professional service. Cover against claims that the advice or service was badly given is essential and many professional bodies and clients insist on it. Finally, we offer £5 million of Employer’s Liability Insurance, a legal requirement if you ever take on extra help or another contractor to finish a job.
Does Contracting Affect My Chances of Getting a Mortgage?
There are very few downsides to contracting but the one that is most often cited is the lack of respect from financial institutions when it comes to applying for loans or (more importantly) mortgages. And despite the fact that more people are contracting or freelancing now than in the last 40 years and that contracting incomes are far higher than that of regular company employees, that rather odd prejudice still exists today.
However, thankfully over the last couple of years a number of very good contractor mortgage specialists have begun offering some very good mortgages to the contracting sector. Whereas high street mortgage lenders in banks and building societies are not well versed in all of the various payment and tax management vehicles that contractors use (and consequently end up seriously underestimating contractors’ incomes) a contractor mortgage specialist will be able to find you a specialist contractor mortgage. These bespoke mortgages have been put together by underwriters who have knowledge of the contracting market; consequently they have allowed for the different methods that need to be used to ascertain a contractor’s income and reliability as a borrower. Such measures would include an annualised income calculation based on their daily rate and an assessment of current and future contracts as well as of past history and earnings.
Here at Hamilton Bradbury we have years of experience of this contractor mortgage market and as the leading PAYE umbrella we have deals in place with a number of contractor mortgage specialists. We can help you get all the ducks in line to get your mortgage and put you in touch with the best contractor mortgage brokers.
Questions, issues or concerns? I'd love to help you!