Are you thinking about joining the world of contracting? Here’s a handy selection of the questions we are most frequently asked by new contractors to help you understand more about Parasol and what to expect when working within the contracting industry.
If anything is unclear or you have a question that isn’t covered here, please contact us and our contracting experts will be more than happy to provide you with any further information and advice you require.
We use the term contractor to describe a person working on a temporary basis for a client, usually having been placed there by a recruitment agency.
Many contractors call themselves consultants or freelancers and in some industries, they may be termed flexible or contingent workers or interims. Typically, they are brought in to work on a specific project for a set period of time being paid a daily rate, or to cover a permanent employee’s period of absence e.g. maternity leave.
IR35 is a tax legislation that seeks to tax contractors, consultants and freelancers the same as if they are employed by the end client themselves.
Previously, small single person companies were used to reduce the amount of tax paid. However, HMRC viewed this as disguised employment and tax avoidance, so introduced IR35 in response. Since its implementation, it has been argued that small companies should be able to trade as if outside of IR35 in order to make tax efficient dividend payments.
Unlike Parasol, certain umbrella companies do still use dividend payment systems and offer IR35 insurance or IR35 friendly assignments. But it is important to remember that contractors in such schemes risk having to pay back underpaid tax going back years. It’s just not worth it in our view.
You may have also seen heard about “S660a” in relation to IR35. This relates to the tax legislation used to prevent the payment of spouse dividends through a company route, which is viewed as avoidance by HMRC. Some schemes still offer this trading arrangement, but employing a partner, wife or husband who does not contribute to the business is incredibly risky.
Parasol and IR35
When you join Parasol, you become a PAYE employee and pay your tax and NI contributions through normal HMRC channels, without being affected in any way by IR35.
Use our online calculators to see what your take home pay and expenses could be as a Parasol employee. With us, you can be safe in the knowledge that everything is above board and you are fully HMRC compliant.
Once you have joined Parasol, you can expect the following simple and straightforward process:
- You submit timesheets and expenses claims through our online portal
- We invoice the client or agency on a weekly or monthly basis
- We receive and manage the payments and pay you directly into your bank account.
Parasol calculates and deducts tax and NI, easing the admin burden and making sure that every employee is HMRC compliant. Our employees get the best of both worlds – freedom and flexibility of the contracting lifestyle, but without the stress, hassle and responsibility of being a company director.
As a Parasol employee, you get a contract of employment, which means all your admin, employment rights and insurance are fully taken care of and you pay your tax and NI contributions through the normal HMRC channels, without having to worry about IR35 regulations.
You are also entitled to the same statutory benefits as a permanent employee, including sick pay, maternity and paternity pay as well as adoption pay.
Parasol has an expert team of support advisors who are committed to providing the very best help and support to all our employees.
Whatever enquiry you have, whether it is a basic question about our online portal and timesheets or a more complicated query about tax and payments, a dedicated advisor will strive to resolve any concerns that you have as quickly and efficiently as possible.
The Employee Support team has a dedicated phone line to ensure that getting in contact with us is completely straightforward and hassle-free.
Parasol has a simple-to-use online PAYE calculator that can help you to work out what your net take home pay and expenses could be as one of our employees.
If you earn an income, you are required to pay income tax. The amount that you do pay will depend on your earnings, employment status, personal allowance threshold and any additional allowances you receive.
When working for Parasol, you will pay income tax through the Pay As You Earn (PAYE) scheme, where the tax is deducted automatically from your monthly pay. Use our income tax calculator to determine how much you can expect to earn after tax as a Parasol employee.
As soon as we receive payment from the agency or client that you are on assignment with, we will match this up with your online timesheets before processing them. We will then take into account any expenses, deductions or allowances, calculate your tax and NI contributions and make payments to HMRC on your behalf on a PAYE basis. Then, the team will transfer the net amount into your bank account via BACs within just 2 working days of us receiving your funds.
These are the costs incurred during your day-to-day business that have been authorised by the client or agency to be reimbursed by them.
It’s important that all client billable expenses are clearly identified and agreed between you and the client or agency before the start of any contract, so there’s no confusion.
As well as the paperwork you’ll need to complete for the client, an online claim must be made to us via the My Parasol portal. We’ll also require all original receipts relating to your claim*. For every online claim submitted, an invoice will be automatically generated which we will then send on to the client or agency.
*If you are entering a claim under a VAT chargeable category we will require an original VAT receipt or a scanned and emailed copy of the original receipt.
Becoming a Parasol employee is completely simple and straightforward. You can either join us online or call to set up over the phone on 0800 458 0818.
Our sister company, ClearSky Accounting, is a Limited company and contractor tax specialist that has been in business since 1995. Sharing the same values as Parasol, the organisation prides itself on providing great support and no nonsense accountancy advice.