Driver Hire Umbrella Company ?
Discussion
I'm maybe going to be doing some temp driving work for an agency called driver hire and they mentioned something about they use an Umbrella company for payment, can someone explain to me what exactly that is ? Anything to watch out for ? I've done some Googling and found bits and pieces and a lot of bad reports but i'm still unsure what's involved my end ? Thanks
Essentially, they don't want to -
a) take you on as a "normal" PAYE employee
b) take you on as a self employed individual
If they take you on as an employee, they will have to factor in the PAYE and NI that goes with that as well as the obligations they acquire as an employer, They clearly don't want to do this.
If they take you on as a self employed individual, they have no responsibility to deduct tax and NI from what they pay you. Instead, you would have to register for Self Assessment and submit your own tax return as a sole trader and pay your own tax and Ni under Self Assessment. This arrangement has an advantage for them as they don't have to cover your tax or NI under PAYE and they escape MOST (but not all) of their responsibilities as an employer
However, they run the risk of having to put you under PAYE if HMRC decided that your status was not truly "self employed". If that happened, the hire company would be liable for any unpaid PAYE and NI - possibly backdated by a number of years. And they don't want to to run that risk.
This is where an "umbrella" comes in. An "umbrella" is essentially a form of employment agency. If you go with the "umbrella" option, you become an employee of the "umbrella" rather than the people you are really working for. This means that the taxi company is completely in the clear regarding any obligations under PAYE and NI.
Instead, it is the umbrella's job to handle taxes and NI on what they pay you.
If the umbrella is a simple operation, they may just handle you as a normal employee and there will be no more issues.
However, many umbrellas add in all sorts of tax wheezes and avoidance measures so that they can escape having to deduct as much PAYE and NI as they otherwise would. HMRC have got wise to some of the schemes used by umbrellas and many are now being clamped down on.
Th whole area is a complex mess and should never have been allowed to get like this.
a) take you on as a "normal" PAYE employee
b) take you on as a self employed individual
If they take you on as an employee, they will have to factor in the PAYE and NI that goes with that as well as the obligations they acquire as an employer, They clearly don't want to do this.
If they take you on as a self employed individual, they have no responsibility to deduct tax and NI from what they pay you. Instead, you would have to register for Self Assessment and submit your own tax return as a sole trader and pay your own tax and Ni under Self Assessment. This arrangement has an advantage for them as they don't have to cover your tax or NI under PAYE and they escape MOST (but not all) of their responsibilities as an employer
However, they run the risk of having to put you under PAYE if HMRC decided that your status was not truly "self employed". If that happened, the hire company would be liable for any unpaid PAYE and NI - possibly backdated by a number of years. And they don't want to to run that risk.
This is where an "umbrella" comes in. An "umbrella" is essentially a form of employment agency. If you go with the "umbrella" option, you become an employee of the "umbrella" rather than the people you are really working for. This means that the taxi company is completely in the clear regarding any obligations under PAYE and NI.
Instead, it is the umbrella's job to handle taxes and NI on what they pay you.
If the umbrella is a simple operation, they may just handle you as a normal employee and there will be no more issues.
However, many umbrellas add in all sorts of tax wheezes and avoidance measures so that they can escape having to deduct as much PAYE and NI as they otherwise would. HMRC have got wise to some of the schemes used by umbrellas and many are now being clamped down on.
Th whole area is a complex mess and should never have been allowed to get like this.
Umbrella companies charge typically per a payment of around £15 - £25+.
That's £60 - £100 per a month in fees if you are paid weekly.
You can claim expenses on the Umbrella scheme to reduce the amount of tax that you pay but it is worth speaking to your accountant for financial advice relating to this as the latest budget will limit the amount of travel and subsistence that you can claim.
Does your agency offer the option for you to receive payments directly from them?
We pay limited companies directly to help them save money that would otherwise go to a payroll company.
That's £60 - £100 per a month in fees if you are paid weekly.
You can claim expenses on the Umbrella scheme to reduce the amount of tax that you pay but it is worth speaking to your accountant for financial advice relating to this as the latest budget will limit the amount of travel and subsistence that you can claim.
Does your agency offer the option for you to receive payments directly from them?
We pay limited companies directly to help them save money that would otherwise go to a payroll company.
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