HMRC have just issued a new consultation document titled: "False self-employment in construction: taxation of workers". HMRC is requesting all comments on the proposals should reach them by 12 October 2009.
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Strictly speaking Umbrella Companies don't charge a "fee". If they charged a fee then it would be subject to VAT. What they do do though is pass on an administration cost in calculating the profit on your contract. This is called the umbrella company's margin.
Often Umbrella Companies quote that if you are a contractor looking to join them then your contract must be be for a period of less than 2 years. This isn't stricly true.
An Umbrella Company is an organisation that contractors can join to ease their tax and pay issues.
Since the introduction of IR35 most companies or recruitment agencies that employ the services of contractors have required that they are invoiced for the work performed from a limited company.