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What is the point of an Umbrella Company?

Umbrella companies are having a hard time of it at the moment with what seems to be permanent bad press, coming under regular attacks from a range of third-parties who think they smell a story that they can take credit for, this includes various Ministries, MPs, self-appointed bodies, ignorant media and anyone else who thinks they're a scam.

In fact, the only body that seems to appreciate the inherent value of an umbrella company scheme is HMRC, they understand the what, how & why of an umbrella. Maybe if the meddlers tried to understand, they'd see the incompetence of some of the more recent arguments.

So what accusations are being made?
1. Contractors use an umbrella service to avoid paying tax.
2. HMRC is losing out on billions.
3. Umbrella companies are not controlled.
And probably the most poignant:
4. The umbrella company is immoral.

So what can we say back to these controversial accusations?
The decision to use an umbrella company has nothing to do with tax - and everything to do with a dislike of paperwork, red-tape & admin. There are many benefits of using an umbrella company, and during a recent survey of contractors in the industry; tax was not in the top five reasons.

HMRC is actually saving money because of umbrella companies. Say there are 500,000 contractors using around 300 mainstream umbrella companies. That means HMRC only have to administer 300 tax accounts rather than half a million individual one-man limited companies! That equates to a massive on-going saving.

A compliant umbrella company is one of the safest ways of contracting and thorough audits carried set out to show the umbrella’s compliance to HMRC’s guidelines. Anyone can say they are compliant, but can they prove it?

When it comes to immorality, you should try asking the thousands of satisfied contractors who use umbrella companies, who agree that they are worth every penny.