Benefits of Umbrella Companies

01/15/2015 - 12:59

There are numerous benefits and reasons that umbrella companies exist for contractors working in the UK and it is not just that they allow contractors to benefit from tax relief for travel and subsistence costs although that is also one of them:

1.Tax Relief on Expenses

By working at a temporary assignment umbrella company workers can benefit from being reimbursed tax free subject to conditions for travel, subsistence and overnight stays (hotels/bed & breakfasts) they incur in delivering the assignment. Generally it is the contractors travelling large distances or being required to work away from home that benefit most from this as claims are proportional to the distance travelled. This is only right as contractors don’t have the luxury of always living close to their place of work and this relief allows them to take assignments that need fulfilling over a short term period.

The following declaration ensures compliance to HMRC legislation:

I declare that all of the above expenses were incurred wholly, exclusively and necessarily in the performance of my duties as an employee of I have read and understood the Expenses Guide and can confirm that the expenses I have claimed relate to a temporary assignment that will be less than 24 months in duration at this workplace.

  • The claim for travel and subsistence is in respect of necessary journeys undertaken in the performance of the duties of the employment or in respect of travel to temporary workplaces.
  • The attendance at the workplace will not exceed 24 months.
  • I confirm that it is my intention to work on a series of assignments across multiple workplaces.
  • The expenses claimed have been incurred and paid by me and the claim is correct in all respects.
  • All supporting documentation has been submitted for my claims.

2.Processing of Timesheets/Expense Claims

An Umbrella Company helps collate hours worked and expenses incurred in delivering the assignment and these can be processed either weekly, fortnightly or monthly. The Umbrella Company verifies all information, collates and stores applicable receipts and raises an invoice and collects monies due. The umbrella company worker is then reimbursed with all required tax deducted at source.

3.Statutory Sick Pay (SSP) and Statutory Maternity Pay (SMP)

By being a permanent employee of the umbrella company the worker benefits from all statutory requirements.

4.Access to Group Pension

As well as access to our Umbrella Group Pension Scheme an employee of an umbrella company will benefit from Pensions Auto Enrolment from the applicable date.

5.Comparable Pay Rate

The Umbrella Company along with the other applicable parties (recruitment agency/end client) help to ensure that temporary workers receive comparable pay and benefits to permanent employees also working at the same location as specified by The Agency Workers Regulations

6.Help in Finding New Assignments

Umbrella Companies can offer the following support:

CV Writing/Interview Technique;

Reimbursement of costs incurred in finding a new assignment;

Job Boards/Utilise Agency Contacts;

Pay Between Assignments (see below Guaranteed Minimum Hours); and

Use of Office Resources in searching for new assignments.

7.Personal Tax Returns

Through our sister company Umbrella Accountants LLP we can provide a Tax Return Service. A benefit of being an employee is that your taxation is simplified and summarised in your annual P60.

8.Umbrella Company Audits

Many compliant umbrella companies are subject to external audits through their trade body membership. We are subject to an annual audit by Professional passport. Due to their size umbrella companies are normally also subject to a financial audit.

9.Guaranteed Minimum Hours

We guarantee you a minimum 336 hours of hours pay each year (pro rata) which may help if you have a gap between finding new assignments. 

10. Contractor Mortgages

We know that many contractors have difficulty in securing mortgages due to the nature of their employment status. Some lenders are not experienced in assisting with the specific needs of contractors.

On top of these difficulties, due to the new mortgage regulations that came into effect recently, some contractors have had difficulty getting appointments with advisers at banks and building societies.

We have specialist experience in contractor mortgages and can help you overcome all these difficulties to secure your mortgage. We offer a mortgage service that can be easily arranged over the telephone at a time convenient for you. Talk to our expert advisors now on 01625 546 235 or email us to arrange a convenient time to call you back. 

Financial advice is given by Umbrella Financial Services. Umbrella Financial Services is a trading style of Phoenix Financial Planning Ltd which is Authorised and Regulated by the Financial Conduct Authority (Registration No 231135)

11.Protection in respect of non-payment by Agency/End Client

Because you are an employee of the Umbrella Company you will still get paid in accordance with your contract of employment for the hours you have worked even when we do not receive payment for the work performed because of a failure of our client i.e. the liquidation or administration of the recruitment agency or end client.

12.Full Illustration prior to Joining

As a contractor you have a number of options available to you which can include being paid through PAYE by your agency, working through an Umbrella Company such as or setting-up and running your own limited company.

13.Comparison to Working through your Own Limited Company

Working through your own limited company can often produce the highest returns but benefits of an umbrella company are there is less administration/responsibility, no IR35 concerns and no insurance or accountancy costs.

14.Childcare Voucher Scheme

As an employee you can benefit from the tax incentive in respect of Childcare Vouchers.

If you want to know more about working through please call us on 0800 121 6513 for a full illustration.