An umbrella company is a vehicle that enables contractors to invoice their client or agency for work done, collect payments and calculate tax and National Insurance payments due.
BBuffalo is a specialist umbrella company providing payroll and tax services to contractors and agency workers.
An umbrella company is the most straightforward and safest option for a contractor or agency worker when compared to limited companies, managed companies and composite companies. These other types of companies are more complicated and involve paying the contractor partly in dividends. Receiving payments in dividends can appear to be beneficial to the contractor reducing the amount of tax the contractor pays. However, not all contractors are entitled to pay themselves in dividends and this could lead to a large future tax bill landing on the contractor and a challenge by HMRC against IR35 tax legislation for unpaid tax and National Insurance. Using an umbrella company removes many of the hassles associated with running a limited company.
The term umbrella company is often used misleadingly as a general term to cover all types of services to contractors, but a genuine umbrella company will not pay a contractor using dividends.
BBuffalo's umbrella company service enables contractors to easily and legitimately take home more of the money they earn. With BBuffalo contractors are able to claim genuine business expenses, such as travel costs, which help to reduce tax and NI payments. Contractors do not have to worry about end of year or future tax bills when using BBuffalo, because unlike other solutions with BBuffalo a contractor's tax and NI is always paid up to date. BBuffalo's umbrella company is easy to use, the contractor can input all their hours and expenses online via their own secure BBuffalo account. BBuffalo is a fixed fee, pay-as-you-use service with no set-up fees, exit fees or hidden charges. All BBuffalo contractors are fully insured with Professional Indemnity Insurance and Employer's and Public Liability Insurance. BBuffalo runs a payroll everyday; this means that contractors are not left waiting for the next payroll date to receive their money.
When choosing an umbrella company contractors should choose wisely. Companies should be avoided that: pay contractors in dividends to increase take home pay when the contractor is not entitled to receive dividends; have hidden fees or exit fees or retain part of the contractor's earnings in some sort of "holiday or sickness" fund; do not have a clear fee structure or increase the fees as the contractor earns more; only payroll once a week or once a month so that they can hold on to the contractor's money; make it difficult for a contractor to submit expense claims or charge an additional fee for processing expenses.
In the United Kingdom, an umbrella company is a company that contractors can use when working "freelance" or "self employed". Both recruitment agencies and direct clients usually require a legal form of trading to be used to ensure they are not exposed to tax and employment liabilities. In such cases the contractor can choose to set up their own limited company or to use an umbrella.
Umbrella company services have become more prominent since the British government introduced so-called "IR35" legislation that makes it less beneficial to start your own company and relatively more attractive to join an umbrella company.
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