A correctly structured Umbrella Company should provide a complete professional employment service for contractors which will include a full contract of employment, HR support, guaranteed hours of work, invoicing and timesheet management, Tax and National insurance contributions (PAYE and NIC’s) and statutory HMRC notifications.

Umbrella Companies such as Parasol, issue invoices on the contractor’s behalf, collect payments from clients/agencies, calculate tax and NI contributions and pay the contractor their net pay direct to their personal bank account. Umbrella company employees are able to claim tax relief on expenses incurred in the course of undertaking their work (travel and overnight expenses etc.) this will usually uplift take home pay. To assist them, umbrella companies have negotiated dispensations with HMRC to derive higher levels of operational efficiency. This is achieved by streamlining administrative processes and in some cases eliminating the need for receipts.

With a good umbrella company you will be fully supported by its HR function, be entitled to a package of employment rights and have access to a range of affiliate offers such as discounts on financial and legal products plus other contractor benefits.

Since the introduction of IR35, the tax advantages of using Umbrella Companies alongside the special dispensations they receive means that they provide a very cost effective and responsible way for contractors to work and an ideal vehicle for first time contractors finding their feet.