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. The structure of an umbrella company enables contractors to claim tax-relief on allowable business expenses and increase their net income.
BBuffalo is a specialist umbrella company providing payroll and tax services to contractors and agency workers.
An umbrella company is a more straightforward and safe option for a contractor or agency worker when compared to operating their own limited company. A limited company is more complicated and involves paying the contractor partly in dividends. Receiving payments in dividends can appear to be beneficial to the contractor reducing the amount of NI 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.
Other types of payroll structures exist which include managed companies, composite companies, and offshore options. While these often promise unbelievable returns, they are highly risky and most often not compliant.
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 is easy to use, the contractor can input all their hours and expenses online via their own secure account. BBuffalo is a low margin, pay-as-you-use online service with no set-up fees, exit fees or hidden charges. We believe have one of the UK's lowest umbrella company margins. 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.
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.