3 myths about umbrella companies

If you are a contract or freelance worker considering, or already operating through an umbrella company, you will be interested in this article. Certain umbrella companies will try and flog you a dead horse even though they know what they are saying is exaggerated or in some circumstances untrue. I have pointed out 3 of the main things to watch out for when joining umbrella companies:



1. Umbrella Companies permit you to claim expenses you don’t necessarily incur – You probably will never hear an umbrella company actually states this, however they usually do not mention that you can only claim expenses that you incur! Seems like an obvious one right? Wrong. Umbrella companies usually have a dispensation. This is an agreement with the Revenue which allows you as a contractor to claim travel and subsistence expenses without having to provide receipts e.g. An umbrella company may permit you to claim up to £14 per day for your lunch, however when they sell you this aspect of the service they tend to just say "claim £14 per day", even though you might only incur £6 per day on lunch. If the Revenue did ask to see evidence that you claimed the £14 and you had nothing to back it up you could be liable for unpaid taxes.



2. You pay less tax with some umbrella companies compared to others – This is completely untrue. It doesn’t matter which umbrella company you join, you will have to pay statutory tax amounts set by HMRC.



3. I can still claim expenses using an Umbrella Company even if I anticipate going back into permanent work – This statement is false. As soon as you anticipate that you will be working on one assignment (or that it may be your last assignment) your right to claim travel and subsistence will cease. This is because your workplace will no longer be deemed as being temporary.



In my experience there are some great umbrella companies out there that are transparent and say it how it is e.g. Danbro, with others being shady about certain aspects of their service.



For further details, please contact Danbro on: 01253 600141,

General Enquiries: 01253 600140,

London Office: 020 7836 8400 or

E-Mail: enquiries@danbro.co.uk