What is an umbrella company?

An umbrella company provides a specialist payroll service for contractors and consultants.

Umbrella companies can ensure that you meet all your tax and National Insurance obligations.

Umbrella companies have become more popular since the IR35 tax rules were introduced. The IR35 rules were designed to prevent tax and National Insurance avoidance by contractors, working through ‘intermediary’ companies, who were, in effect, directly employed by their ‘clients’.

The umbrella company employs you directly. It calculates, and then deducts, tax and National Insurance contributions at source. Umbrella companies are also able to reimburse you for business expenses.

Some umbrella companies may provide additional benefits, such as professional indemnity insurance cover, public liability insurance and even contributory pension schemes.

Umbrellas and people4

Because of our obligations, due to our legal status as an Employment Business, we need to be sure that you pay the relevant tax and national insurance contributions on the transactions that are processed through this website. Otherwise either we – or our Buyers – could become liable for any unpaid tax.

For this reason, all of our Sellers need to be paid through a limited company. This ensures that the appropriate taxes and national insurance have been paid.

If you are working as a sole trader, and not through your own limited company or a consultancy (which must also be a limited company), you will still need to be paid through a limited company.

people4payments

people4business has entered into an agreement with «CXC», to provide low-cost umbrella services to people4business Sellers, called people4payments.
 
The charges are: £20 for the first payment to be processed – including set-up – with further payments being processed at £10 per payment.
 
Like the majority of umbrella companies, people4payments also deducts tax and both employers and employees National Insurance, before passing payment through direct to your bank account, by BACS transfer.

This service is only available to registered Sellers on people4business – find out more

If you are a registered Seller, and you would like to use this service, please download and complete the registration form and the P46 form.

Please send the completed forms to:

people4payments, CXC, 65 London Wall, London EC2M 5TU

Fax 020 7374 6987 | Tel 020 7374 6957

If you want any more information about people4payments, you are also welcome to contact the people4business customer service team:

seller@people4business.com | Tel 0870 389 3244 | Fax 0870 389 9344

How do umbrellas work?

The benefits of umbrellas

Umbrella companies can make your life as a Seller much easier. Whether working through people4business or for your own clients, your umbrella company can handle some of the time-consuming administration that is part of being self-employed. With your tax, National Insurance and any other required insurances taken care of, you can concentrate on your current and future contracts.

The cost

Most umbrella companies charge a percentage fee, while some charge a flat rate.

Some companies vary their charges depending on whether you want to be paid weekly or monthly.

Some will only charge you when you have a contract.

Receiving payments

Umbrella companies will usually issue invoices to your clients on your behalf. They will then collect payments from clients and agencies, and pay you a net figure, after deducting tax and National Insurance, any other contributions, and their fee.

Payments from people4 sites

When you are working through people4business, we issue invoices to clients on your behalf and collect payments from your Buyers ourselves. We then pay your umbrella company, which in turn pays you.

Your payment will normally be issued 30 calendar days after your end-of-month or final timesheet is approved. If you select the Fasterpay option, your payment will be issued after 5 working days.

people4business partners

We want to ensure that working through people4business is simple and hassle-free for everyone. We are actively encouraging umbrella companies to become people4business partners, so that we can work together to make Sellers’ lives easier.

Our current umbrella company partners are «ContractorUmbrella.com» and «CXC»

For information on becoming a people4business.com partner, please refer to our partners page.

The ‘opt out’ for Sellers registered with an umbrella

The Conduct of Employment Agencies & Employment Businesses Regulations 2003 (the Regulations) potentially apply to the services we provide to Sellers.

The Regulations are intended to protect vulnerable workers from exploitation, but the government realised that the provisions of the Regulations may be detrimental to some highly skilled Sellers and, subject to safeguards, allowed Sellers to opt out of the Regulations.

Who can opt out

Any Seller can opt out of the Regulations unless they work with children or vulnerable people. people4business.com does not supply Sellers to work with children or vulnerable people.

Advantages of opting out

Tax advantages – the Regulations refer to the worker being under the ‘control’ of the client. If you wish to avoid being caught by the IR35 legislation, opting out of the Regulations may well assist your tax position by allowing numerous commercial clauses to be used in your contractual relationship with us, which indicate a commercial relationship with the client, thus demonstrating your status as a genuine business. Some of these clauses are prohibited under the Regulations – hence the advantage in opting out.

Reduced administration – the administrative requirements of the Regulations are burdensome. They include a duty upon us to obtain formal, physical evidence as to your identity, experience, training, qualifications and professional authorisations. A Seller who stays within the Regulations will need to supply suitable documentary confirmations to us before we can legally provide them with work. So, remaining within the Regulations may, by virtue of inevitable delays, harm your flexibility to accept assignments.

Client preference – many clients specify that they only want Sellers who have opted out of the Regulations. Clients often prefer opted out candidates as this enables them to reduce their administration, protect themselves against expensive employment rights claims and protect their legitimate confidential business interests.

Ease of placement – due to reduced administration, Sellers who have opted out of the Regulations are easier to place in work. This is particularly important if the vacancy needs to be filled quickly.

Recommendation

It is, of course, your decision, but we strongly recommend that Sellers opt out of the Regulations.

If you do not wish to opt out of the Regulations, we will need to treat you as being covered by the Regulations and engage you upon terms that are compliant with the Regulations, which will not enable you to act on an IR35-friendly basis. Due to the reduced administration that results from opting out, and the general preference our clients have for opted out candidates, we recommend that all Sellers opt out.

It is important to note that we do not make our provision of work-finding services conditional upon an opt out being exercised. 

How can I opt out?

In order to opt out of the Regulations, you need to give notice to us stating that you do not want the Regulations to apply.

This notice can be given in the ‘My Details’ area of your people4business homepage.

A notice that is given during an assignment contract will not take effect until that contract has ended. An opt out notice can be withdrawn, although, if withdrawn during a people4business contract, the withdrawal only takes effect after that contract has ended.

Links

The IR35 page links to information specifically on IR35.

An article on choosing an umbrella company (written by a representative of an umbrella company): «www.ir35.calc»

last updated 17.04.08