Article DetailsAvail Tax Advantage with Umbrella Companies |
| Date Added: July 19, 2011 01:11:33 AM |
| Author: Michael Hunt |
| Category: Business & Economy |
| Umbrella Companies can be just phenomenal vehicle for tax saving. In order to save tax, many companies try hiring accountants who can provide great benefits. The fact is that any umbrella company can also help you in great tax saving. Since the basic aim or purpose of Umbrella Companies is to promote the growth in business sector, therefore they also provide a lot of tax advantages. Umbrella is one of the efficient ways to choose especially if you are interested in short term jobs. There are ample Umbrella Companies these days but you need to understand that not all companies will facilitate you with good solutions. Umbrella Company Many contractors decide to work via an umbrella company, which is very much the 'hassle free' route to take. All you need to do once you sign up to an umbrella service is to submit your timesheets and expenses claim online, and your umbrella will take care of all your administration, and pay you a regular salary net of tax and NICs. This is not the most tax efficient way to contract, as you will be liable to pay full income tax and NICs on your entire income. You cannot take advantage of the tax benefits associated with working via a limited company. If you are contracting on a short-term job, then an umbrella could be the ideal solution for you, as it is so quick to put in place. If your contract work is caught by the IR35 rules, then the tax benefits of working via a limited company are very much eroded, and an umbrella company may be the best solution for you. Contractor Limited Company Most contractors set up their own limited companies to undertake contract work. The main benefit of contracting via your own company is that you can make significant tax savings compared to umbrella company contractors and permanent employees. If you work via a ltd company, you will derive most of your income in the form of dividends (which do not attract any National Insurance Contributions), and a modest salary. You should sign up to use a specialist contractor accountant, who will take care of all your legal and statutory obligations as a contractor. Although your accountant will take care of you tax a legal administration, you should remember that as a limited company director, you are ultimately responsible for ensuring that you submit your accounts and other paperwork accurately, and on time. In terms of administration, you will have to spend an hour or so a month updating your records, invoicing clients, and sending your paperwork to your accountant. However, and 'hassle' you suffer is very small compared to the tax benefits of being a limited company contractor. Further Considerations One of the main factors you should consider before deciding upon a business structure for your contracting business, is whether or not your contract work is caught by IR35 or not. Essentially, IR35 targets contractors who work in an almost identical way to permanent employees, and do not demonstrate that they are 'self employed' according to the HMRC definition. If you are unsure as to whether or not your contracts are caught by IR35 or not, make sure you send your contracts to an IR35 status review specialist who will provide the advice you need. Before choosing any company, you need to understand about its history, present status, everything about company and much more. Basically, you should scrutinize the company well before opting for it. In case the background of the Umbrella Company you chose is shady, you are likely to get some disadvantages, forget about reaping the tax benefits. Umbrella Companies can offer a lot of benefits apart from just the tax advantages and only if you hire services of a good company, you will succeed. Michael Hunt is the author of this article on IT Contractor. Find more information on Umbrella Companies here |
