If you are going to use the services of an Umbrella Company to handle your pay, why would an estimated take home pay figure be more important than the service you are likely to receive?
I personally blame the unscrupulous Umbrella Companies who suggest that they can net contractors a higher take home pay. This is simply not true; ALL umbrella companies work in exactly the same way. Umbrella company calculators that show a high net pay either operate a scheme outside of PAYE or they assume high levels of expenses which you may or may not be entitled to claim.
Umbrella companies that are allowing large amounts of un-receipted expenses to be claimed that haven’t been incurred are not compliant and are giving HMR&C ammunition to target the industry. This approach is resulting in more and more contractors ringing round simply asking for net pay ‘quotes’ and forgetting the important facts such as fees, customer service and reputation.
Basing your choice of Umbrella Company purely on who can offer the highest pay is fine…until you have a problem or query. Isn’t it going to be frustrating when you are kept on hold for ages, you can’t ever speak to the same person twice or you have to wait days for a response to your queries?
Don’t get me wrong, I can totally understand that people want to keep as much of their hard earned cash as possible but the only ones who are going to lose out by using these companies are the contractors.
How do they get away with it I hear you ask? Well the Umbrella Company is miss-selling their dispensation which I have explained here: blog. They use the sales hook of ‘maximise your net pay’ to reel in contractors that are new to the industry and unfortunately don’t know any better. This is extremely bad practice on the part of the Umbrella Company because the contractor could be building up a large tax liability, probably without even realising it.
The HMR&C investigation window is 6-7 years and they can ask you to substantiate your expense claims at any point within this time frame. If you are unable to prove you have incurred the costs you have claimed, you will have to pay back all the tax you have underpaid plus a fine. Any claim of protection from an HMR&C investigation is again sales patter and simply untrue because any unpaid tax, interest and fines will be payable by you the contractor and not your Umbrella Company.
The simple truth is; the only difference between the net pay offerings of one Umbrella Company to the next should be the fees they charge for their services.
Through an Umbrella Company you may be entitled to claim certain business expenses that have been incurred in the course of your contract but these should be exactly the same, regardless of the company you use, because it is HMR&C that dictates what expenses you can claim and not the Umbrella Company!
Our website has some top tips to bear in mind when selecting your Umbrella Company. Alternatively you can contact one of our expert advisors on 01206 713 680 or email us at info@contractorumbrella.com.
