Working through an umbrella company: the mechanics


Negotiating your terms and getting paid

When you take on new assignments through Competex Umbrella, you negotiate the terms of each assignment with the agency or end-client (on behalf of Competex Umbrella) before you start work. The arrangements you make for payment of fees and personal expenses are then incorporated into our service contract with the agency or end-client, and into your salary payment structure.

Once you have started work, you are normally required to complete time sheets which the client must approve before we can invoice the agency or end-client for the work you have done. Then, when the client or agency pays us, we pay you. If you are working through an agency with semi-automated billing and payment systems, this significantly speeds up the process.
You may negotiate with the client to pay whatever personal expenses you both think to be reasonable, but only those expenses permitted by HMRC are paid to you free of tax. Other amounts received from the client as expenses but which are not allowed by HMRC go to increasing your salary.

As well as claiming personal expenses from your client you may also claim certain personal expenses from Competex Umbrella and these expenses, together with the costs of employment (eg employer’s NI) are taken out of the total fund received from your client. If you wish to pay pension contributions out of your fund, the staff at Competex Umbrella can make appropriate arrangements, which could form part of your financial planning and lead to certain tax savings – see below.

What personal expenses can I claim?

You are able to claim legitimate travel costs, subsistence, professional subscriptions, eyesight tests and itemised telephone calls. In addition Competex Umbrella is able to pay personal pension contributions or provide childcare vouchers, by way of salary sacrifice which, again, will come out of the total fund received from the client. The effect of this is very similar to when you work through your own company and pay yourself all your fee income as salary.

Although you can negotiate for the client to pay for commuting to and from your usual place of work, HMRC no longer permit you to receive these expenses free of tax if your work comes under IR35. However, these expenses augment the funds available to you, and go to increasing your salary.

Next resource: The basics of IR35