Umbrella companies for IT contractors - our recommendation

Use of Umbrella Companies

The majority of contractors do not pass IR35 self employment tests (these determine whether you are truly in business on your own account and can demonstrate that you take business risk). Commonly they undertake one assignment at a time, source work via recruitment agencies and are paid on a time and materials basis. For this reason they may choose to use an employment structure (commonly referred to as an umbrella company) instead of running their own limited company structure.

These are some of the main reasons why an employment management service may be the most sensible choice:

You are new to contracting and wish to take things one step at a time

You do not expect to remain contracting long term.

You are "IR35 caught" and prefer to adopt the simplest approach (since you will save very little money by running a limited company).

You are currently running a limited company but the costs and time implications do not justify its existence.

With ever evolving employment legislation and increasing scrutiny from HMRC on tax and employment structures, it is imperative that freelance workers are able to engage with a responsible solution that covers all the required legislative and contractual requirements whilst making the overall process as straightforward as possible.