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Under this arrangement, workers become employees of an umbrella company rather than being self-employed or having their own limited company. The umbrella company handles tax and National Insurance contributions on behalf of the worker, ensuring that they are paid correctly and in compliance with tax regulations. This simplifies the administrative burden for temporary workers and ensures they receive their entitlements while having the flexibility to work for multiple clients.

When working with an umbrella company, a Personal Service Company (PSC) and a Limited Company offer distinct structures for contractors or freelancers:

       1.  Personal Service Company (PSC): A PSC is a limited company set up by the contractor to provide their services to clients. It’s typically used by contractors who work under IR35 rules, meaning they’re deemed to be an employee for tax purposes if they don’t meet specific criteria. 

       2.  Limited Company: Contractors who operate through their own limited company are responsible for their own tax affairs, including corporation tax and VAT registration. 

When working with an umbrella company, insurance cover is typically included as part of the service to help protect contractors against various risks associated with their work. The specific coverage may vary by umbrella provider, but commonly included insurances are:

       1.  Professional Indemnity Insurance:

       2.  Public Liability Insurance

       3.  Employers’ Liability Insurance

       4.  Personal Accident Insurance

A CIS (Construction Industry Scheme) service when working with an umbrella company is designed for contractors and subcontractors working in the construction industry. The CIS is a tax deduction scheme set up by HMRC, where contractors are required to deduct tax at source from payments made to subcontractors.

A consultancy service when working with an umbrella company typically involves offering professional advice and expertise to clients in exchange for a fee, with the umbrella company handling key administrative and financial aspects. This service is often used by individuals or firms in fields such as IT, management, engineering, and other professional sectors where specialized knowledge or skills are required.