What is an Umbrella Company?Posted Tuesday, February 12, 2019
By Jennifer Doyle, Client Solutions Manager, Contracting PLUS
What’s an Umbrella Company?
As a Solutions Consultant, I spend a lot of my time speaking with individuals who are considering Contracting in Ireland for the first time. The question I am asked most often is “How do I start Contracting in Ireland?”. Thankfully, it’s not at all difficult. I’ve answered this and some of the other common questions asked in this article.
In most cases, you may be interviewing for a Contract role, or you may have even received a Contract offer, before the words “Umbrella Company” come up in conversation with your client or recruitment agency. This invariably leads to the question “Why do I need an Umbrella Company”. If you’re not familiar with operating in the contracting industry, the thoughts of setting up and trying to run a company while also working full time in your new role can seem (understandably) daunting! However, Contracting in Ireland becomes very simple when you use an Umbrella Company provider.
Over 80% of Contracting PLUS clients who are contracting in Ireland use an Umbrella Company. This is how an Umbrella company works;
- An Umbrella company is a company that is already set up.
- It is registered for the right taxes and has a tax clearance certificate.
- There is already a bank account open in the company name and this is administered by the Umbrella Company provider (i.e. Contracting PLUS).
- No-one other than the Umbrella Company provider has access to the bank account. You won’t have access and neither will your fellow directors (more on this below).
How do I get an Umbrella Company?
It is very easy to get set up in an Umbrella Company – we can have you set up and ready to start Contracting in Ireland on the same day you talk to us. There’s no cost to getting set up and whenever you finish your contract, you just leave the company. However if you’re going to be starting another contract, then we recommend you stay in the company (at no cost to you) until you’re ready to start contracting in Ireland again.
What is a Director Umbrella Company?
This is the more popular of the two Umbrella company types as it offers you the best structure to claim business expenses, pay into a tax efficient executive pension and maximise your earnings.
Here’s how it works;
- You become a Director of our Umbrella Company.
- There can be up to 5 other directors in the company at the same time. You don’t need to know the other Directors. The Umbrella Company provider administers everything so you can concentrate on your work. Contracting PLUS is Ireland’s largest Umbrella Company provider and safely manages over 600 tax compliant companies.
- At the end of the month (or week), your client will approve your time-sheet based on the hours you have worked on their project. The Umbrella Company will invoice your client for the amount due to you. For example, if you agreed a rate of €400 per day, and in the month you work 20 days for the client, we will raise an invoice for €8,000.
- The same day this €8,000 is lodged to the Umbrella Company bank account, Contracting PLUS will refund your expenses (which you will have submitted through our simple app), transfer an amount you want to contribute to your pension provider. The balance will be operated as normal payroll. The relevant taxes are deducted and paid to the Revenue Commissioners.
- The balance is then transferred to your bank account – this is your money to do with as you like. There’s no need to keep any aside for a tax bill because we’ve already deducted the right taxes.
What business expenses can I claim in an Umbrella Company?
If you’re thinking of contracting in Ireland though an Umbrella Company, one of the benefits will be the ability to claim business expenses. Claiming business expenses helps reduce the amount of tax you pay. The expenses you can claim will largely depend on the type of work you are doing, and where you’re doing it.
Every Contractor at Contracting PLUS has a Dedicated Account Manager; a single point of contact for all your questions. This person will give you all the advice you need around business expenses.
The more popular ones tend to be;
- Mobile Phone
- Home Broadband
- Computer equipment
- Upskilling your expertise (courses, training
- Travelling costs
- Industry related magazines, books and journals
We try to be fair, but we’ve also had a few chancers over the years. Some of the expenses we’ve had to refuse were;
- A lawnmower (for a doctor)
- A €5000 Rolex watch (so they could be on time for meetings)
- A 65inch 4k Ultra HD TV (because he needed a large monitor in his living room)
- 5000km of mileage for a flight taken
- €900 fur coat (suggested it was necessary work wear)
The Benefits of an Umbrella Company
- An Umbrella Company is a Limited Company which is set up and can issue invoices and process payments on your behalf easily.
- Through the Umbrella Company, invoices are raised for the work that you have undertaken and taxes are deducted and paid to the Revenue Commissioners on your earnings (here at Contracting PLUS, we look after all of this administration, payroll and tax for you!)
- The Umbrella Company provides a compliant structure for you to operate through for the duration of your contract role – our Umbrella Companies are covered for Public and Employer Liability and Professional Indemnity insurances (at no extra cost to you).
- An Umbrella Company allows for free and immediate set up. We understand that the Contracting market moves quickly so we can get you registered within a matter of hours.
- Our Umbrella Company solutions operate on a pay-as-you-use basis so you only pay a fee when we are processing a payment for you, making this quite a cost-effective option with no set up or close down fees.
Hopefully, this helps in answering some of your Umbrella Company questions. I’m more than happy to chat further on any queries that you might have, just give me or one of the team a call on 1800 54 54 22.