Umbrella Company Frequently Asked Questions

Below is a list of commonly asked questions regarding Umbrella Companies and Contracting.

Why can’t I be self-employed

Agencies and Companies that use Contractors are reluctant to pay you for your time unless they receive a valid tax invoice. This is because if they are deemed to have paid someone who should have been an employee then they can be penalised for the PAYE and National Insurance you should have paid if you had been an employee.

You are therefore required to either set-up your own Limited Company or become part of an Umbrella Scheme (which clarifies your employment status).

By joining PayMatters you become in effect an employee of PayMatters which clarifies your status.

What is IR35 ?

IR35 is Government legislation relating to Intermediaries introduced on 6th April 2000 in the Finance Act 2000. It was introduced to stop Contractors avoiding tax and National Insurance through the use of Intermediaries such as Personal Service Companies or Partnerships. Historically people saved National Insurance contributions by drawing out "wages" via a dividend. IR35 ensures you pay tax similar to what you would pay if you were employed rather than being a contractor.

I am in a Composite Scheme / Managed Service Company

From April 2007 Composite Schemes are no longer viable for UK Contractors who fall within the scope of IR35. Setting up your own Limited company or being part of an Umbrella scheme like PayMatters are the options available.

On 6 April 2007 Chapter 9 ITEPA 2003, more commonly known as the Managed Service Company ("MSC") Legislation, was introduced. The MSC Legislation applies to individuals providing their services through intermediaries which meet the definition of a Managed Service Company.

The MSC legislation ensures all drawings are subject to PAYE/NIC’s and any liability for taxes owing became the personal responsibility of the Company Directors or MSC Service Provider.

An intermediary must consider whether the MSC Legislation applies before considering IR35. Intermediaries that do not meet the definition of an MSC must continue to consider IR35.

Why PayMatters ?

We believe we offer a fast, efficient and reliable service for good value for money.

We are fully HMRC Compliant.

Do you charge a set-up or initial fee ?

No.

What do you charge ?

Our Administration Cost is either £27.56 per week or £89.96 per month. Please note our cost is tax deductible so the net cost to you is less.

As a higher rate tax payer the net cost to you is £14.41 per week or £47.06 per month. As a basic rate tax payer this is £16.85 per week or £55.03 per month.

If I leave Paymatters, do you charge a fee ?

We do not charge a termination fee.

Why do I get charged for employers NIC ?

PayMatters have to pay employers National Insurance at 12.8% of your gross pay over the lower earnings limit.

We pass on the whole of the profit on your contract to you less the costs we incur on your behalf, our administration cost and any monies you have already been paid.

When do I get paid ?

We perform Daily BACS payments. So as soon as we receive your payment we forward it onto your Bank Account.

How do I know what and when I’ve been paid ?

We produce and send you a Payslip (by post or email). Payslips are also available to view online. We can also send you an SMS when the payment has been made.

What do I need to do to get paid ?

All you need to do is submit your timesheet and expense claim on the weekly or monthly due date.

As soon as we receive it we issue an invoice for amounts owed to the end client and we monitor to ensure invoices are paid on due dates.

As part of our service we will remind you if we believe you have forgotten to submit a timesheet.

To avoid paying emergency tax you will need to send in your P45 from your previous employment or umbrella company. If you do not have one we will send you a P46.

What expenses can I claim to reduce my Tax Bill ?

We follow HMRC Dispensation Guidelines to ensure we maximise your valid claims. Please see our separate page dedicated to expenses.

Do I need my own Insurances ?

No. We provide Professional Indemnity Insurance with cover up to £2m, Employers Liability £10m and Public Liability £5m . If your contract requires additional insurance to this please ask your manager and we can help arrange this for you at competitive rates.

Can I join a pension ?

Yes you will be eligible to join PayMatters Group Pension and can also join our Health Care Scheme.

What happens if I need proof of earnings for a mortgage application ?

Because you are employed by us we are happy to provide proof of earnings and employment history when requested.

How is Holiday Pay calculated ?

In accordance with the Working Time Regulations 1998 you are paid for your holiday entitlement. 10.17% of each payment made to you is in effect your Holiday Entitlement.

How is Sick Pay calculated ?

We calculate sick pay in accordance with the current Statutory Sick Pay rules.

What contracts will I need ?

You will have a contract of employment with PayMatters. We then take care of all other contracts.

We have standard contracts that we can issue to your Agency (or we can use their standard contracts).

Can you help if I get a Tax Return ?

Yes for an administration fee of £100 plus VAT we can fill out your tax return on your behalf.

I already have my own Limited Company ?

If you are finding running your own Limited Company a headache then we can take over all future invoices and payments.

I am already with another Umbrella Company, but am not happy with their service

No problem. Inform your current umbrella company you are leaving and request your P45 from them. On receipt, forward it to us and we will do the rest! We will set you up within 24 hours. We pride ourselves on our service levels, because your pay matters!

Do I have to wait until my contract comes to an end before joining you ?

No, you can join Paymatters at any time and we will deal with all paperwork.

Do I have to wait until the start of the new tax year before joining you ?

No, you can join Paymatters at any time and we will deal with all paperwork.

What if I don’t comply with legislation ?

HMRC are extremely focussed on ensuring Compliance to Tax Regulation. Specialist Compliance Teams exist as in the past people and companies employed tax avoidance schemes to try and reduce tax payments (normally by claiming business expenses that HMRC didn’t consider valid deductions). PayMatters are fully HMRC Compliant and deal with all tax issues on your behalf, giving you confidence you are in safe hands.

How do I join PayMatters?

Please call us now on 0800 121 6513 or submit an Enquiry at PayMatters.co.uk and we will call you straight back.

Alternatively visit PayMatters.co.uk and join us on-line in minutes! It’s that simple!