umbrella company uk

Although there are now millions of happy, successful independent contractors in the United Kingdom, getting started with this kind of work is not always easy. In fact, there are a number of barriers that commonly present themselves to new contractors, and failing to overcome any of these can easily make contracting seem far less attractive.

One of the most imposing of these is dealing with the way that contractors are viewed under the United Kingdom's unique system of taxation. Naive contractors who simply assume that their tax bills will remain similarly proportional to their incomes as in the past are invariably rudely surprised. In fact, contractors who fail to make special arrangements end up paying a far higher rate than employees of conventional kinds do.

There are good, legitimate ways of working around this problem, though. The status of umbrella companies in uk law means that these legal instruments can be used by contractors to secure far more attractive tax classification. A contractor who does so thereby becomes the owner of a company that then pays out for the services the contractor renders, just as a traditional employer does.

This does entail observing some particular requirements that are not typically obvious, though. The misuse of umbrella companies in uk history means that there are a number of regulations designed to ensure that these excesses are not repeated.

For example, the company has to be established and run in such a way that the contractor in question could, theoretically, be replaced by a different, similarly skilled individual. If this requirement is not met, then the kind of umbrella company uk contractors so often use could be judged to be out of compliance with IR35, a regulation designed to prevent certain kinds of misuse of these legal entities.

While that might seem like a difficult standard to live up to, the reality is that this is fairly easy to do, in most cases. For those who take advantage of the services of specialists like contracting ir35, in fact, it typically becomes a routine matter, with only a few simple requirements needing to be lived up to.

There is a reason, after all, that so many people in the United Kingdom today enjoy and thrive with con