PAYE Umbrella Companies
PAYE Umbrella Companies are basically the safest route for Freelancers. They are beloved by the Government and HMRC as they don’t take the mickey as regards expenses and are a lot safer than the offshore Employee Benefit Trust route. Basically, freelancers become employees of these Companies. They PAYE Umbrella Companies do all the admin work for them. All the freelancer needs to do is enter the details on an electronic timesheet and post details of legitimate expenses. The Companies will then invoice the end clients, deduct tax taking into account legitimate expenses and pay the freelancer. For those who are caught by IR35 or want to sleep safely in their beds at night (or who want to simply get someone else to do all their admin for them) PAYE Umbrella Companies are for them. It doesn’t suit everyone. Some contractors would prefer to take more risks and use Limited Companies or even offshore companies based in the Isle of Man or elsewhere. However, more and more contractors are using the PAYE Umbrella Companies route. In 1999 when IR35 came into being there were virtually no Umbrella Company contractors. Now there are over 200,000 and a great chunk of those are in PAYE ones.
One of the first PAYE Companies to start up is Parasol. It was started by two IT Contractors who were discussing the effect on themselves and other contractors of the new IR35 legislation. One guy said that he was in an Umbrella Company. Everyone asked what that was. Some of them joined one. The two guys decided to start their own and now Parasol have thousands of contractors. They are not the only ones as the PAYE brolly route one of the most popular vehicles of UK Contractors and much beloved of the UK Government.
For a selection of good Umbrella Companies check out Which Umbrella Company