Freelance contractors are often obligated to form an independent company in order to meet compliance regulations. Paperwork, understanding allowable claimable expenses and non-claimable expenses that can be used to offset tax liability, handling payroll and making sure you’re compliant add hours of time to jobs, cutting into both personal time and profitability. Why trade the convenience of freelance work for the trouble and headaches of being overwhelmed by administrative duties?
Employment involves a certain amount of normal and expected time away from home and family. Freelancers who work away from home on temporary contracts are entitled to allowable expenses which help offset tax liability, but the time it takes to record and file all the paperwork, keep accurate records and run a payroll may take so many hours that your spouse and children could forget who you are. An umbrella company can bridge the gap between the flexibility and convenience of independent work and complying with all the complicated regulations regarding tax collection and expense claims.
An umbrella company allows you to keep the freedom of being a freelance contractor while removing the liability and responsibility for the keeping of records, calculating expenses and tax liability, and running a payroll. With so many complicated compliance regulations and the constant danger of audit, why risk running into legal issues? Contracting with an umbrella company allows independent contractors to be paid under a PAYE scheme, removing the hassle and worry of tax liability and withholding. Simply keep your receipts and hand over your timesheets and expense reports, and wait for your cheque to arrive.
An umbrella company acts as an employer in the eyes of Inland Revenue, allowing a contractor to receive regular pay cheques, yet it still allows a freelancer to retain the freedom of negotiating independently with clients.
New freelancers or employees taking temporary contracts between permanent positions may find that the services of an umbrella company can make temporary contracting simpler and far more efficient. When an employee first decides to go out on their own as an independent contractor, there is more than enough work involved in establishing themselves. Contacting potential clients, landing contracts and completing high-quality, efficient work all takes time. Add in running a payroll and all the record keeping, filing and compliance issues that go along with the administrative side of creating an independent limited company, not to mention the hassle of creating and running a payroll system, can make it nearly impossible for an independent contractor to successfully create a viable business. An umbrella company can be the stepping-stone that helps a freelancer make the transition to running a limited company. Once a company is established, an umbrella company can provide efficient, cost effective management of payroll, tax compliance, invoicing of clients and, in some cases, insurance cover.
With the pressure and stress of administrative tasks greatly reduced, a business is freed up to concentrate resources, time and staff where they can bring in the most return for the time spent, making for a much more efficient and profitable operation.
Courtesy of Crystalumbrella.com