What is IR35 or “off-payroll legislation”?

IR35 is the short name used for the ‘intermediaries legislation’, which is a set of tax rules that apply to you if you work for a client through an intermediary – which can be a limited company or “personal service company” which is how many contractors operate.

Contractors in a labour supply chain, operating through a PSC (or another form of intermediary), will receive a status determination from the client together with reasons for the determination at the start of the contract. If the client determined that the contractor should be taxed as if they were employed (i.e. off payroll legislation applied), then the cleitn would be obliged to either ensure that contractor is “on-payroll” (either employed directly or through an umbrella company) or that employment taxes are deducted before paying contractor’s ltd company.

What is an umbrella company?

Our umbrella company is a PAYE payroll service for contractors. The contractor will become an employee of the umbrella company and will be paid by us, minus deductions including Income Tax, National Insurance Contributions (NIC) and Apprenticeship Ley. Using an umbrella company is widely accepted as being the easiest way to get paid as a contractor.

How does an umbrella company work?

SG Umbrella Ltd will officially become your employer once you have completed the registration process, consisting of a new starter form and identity checks. Once registration is complete, you will become an employee of our umbrella company and receive your salary from us through PAYE. The appropriate deductions, including Income Tax and National Insurance Contributions (NIC) will be made on your behalf. As an employee, you will be eligible for employee benefits including Sick Pay, Statutory Maternity/Paternity Pay and Annual Leave.

SG Umbrella Ltd will sign a contract with your recruitment agency. Your client will pay your recruitment agency their agreed rate, the recruitment agency will then pay SG Umbrella Ltd, and finally, the umbrella company will pay you your wages (minus deductions).

Am I self-employed when using an umbrella company?

No. Whilst you are contracting through the umbrella company, you will become our employee and will have access to employee benefits including Sick Pay.  This also helps with having continuous employment with things like mortgage applications.

How will I be paid when working through an umbrella company?

All SG Umbrella Ltd employees are paid by faster payment.

How often will I be paid by an umbrella company?

Payment to our employees is dependent on receipt of funds from the agency.  Once we have received cleared funds from them then we have a number of pay runs every week to ensure our employees are not waiting a long time for their wages.  To ensure there are no delays it’s important to keep your timesheets up to date.  We have an online portal for you to manage all of this.

How much does it cost to join or leave an umbrella company?

SG Umbrella Ltd apply no charges for this, in short no joining or exit fees.

How much does it cost to use your umbrella company?

We just have one low price to keep things simple.  Our prices are listed below and depend on if you are paid monthly or weekly.


What will an umbrella company deduct from my pay?

You will be paid as a Pay As You Earn (PAYE) employee and will have Income Tax, National Insurance Contributions (Ee’s and Er’s NICs) and Apprenticeship Levy deducted from your salary (and paid to HMRC), as well as the umbrella company’s margin/fee.

What does Pay As You Earn (PAYE) mean?

Pay As You Earn (PAYE) is a process used by employers when paying their employees’ wages. As the employer we will make the correct deductions to the employees’ pay, including tax and National Insurance Contributions (NICs), then pay the employee the net value.

How much money will I take home using an umbrella company?

As a compliant UK based umbrella company, we will make statutory deductions to your pay plus margin fees.  Take home pay will depend on hours/days, rate, tax coding and any other voluntary deduction, ie employer pension contribution.  Pay illustrations are available on request.  There are some unscrupulous umbrella companies that claim to increase your take home pay through convoluted schemes (payments via loans or offshore schemes).  Be wary of these types of arrangements – they are constantly being closed down by HMRC leaving the contractors with large tax bills and the scheme operators nowhere to be seen.  All umbrella companies should provide the same take home pay figure if they are doing things correctly – and the comparison should be made based on margin deducted and service etc rather than a artificially low take home pay figure.

Are umbrella companies compliant with HMRC legislation?

Not every umbrella company is compliant with HMRC legislation. For example, umbrella companies that promise you an alarmingly high percentage of take home pay are more than likely encouraging you to avoid tax.

Be fully assured that SG Umbrella Ltd operate in full compliance with HMRC legislation and are regularly audited to ensure our processes are correct and up to date.  We are an FCSA accredited member giving you peace of mind that we have been doing this a long time, acting for thousands of contractors and doing things properly.

What information will I need to provide when I join an umbrella company?

When you join our umbrella company, we will need you to complete the online new start form and supply ID documents. This is usually a one off process that will require you to provide us with the following information:


Full name

Date of Birth


Phone Number

Email Address

Passport/ID Number and country of issue

Residence permit if applicable

Utility bill

National Insurance Number

P45 or Starter Declaration

Student Loan

Bank/Building Society Name

Account Number and Sort Code

Recruitment Agency Name

Assignment Start Date


What administration will I need to carry out?

When you use our umbrella company, your administrative responsibilities are kept to a minimum. Once the registration process is complete and you have signed a contract with the umbrella company, you will be required to submit your signed timesheets and allowable expense claims.  You will do all of this through our online portal.

How do I submit my timesheets?

This can be done directly via our online portal.

Will I receive payments such as sick pay and holiday pay?

When you work through an umbrella company you are entitled to the same benefits as those who are in full-time employment. You are entitled to Holiday Pay, Sick Pay, Maternity Pay and Paternity Pay.

How is holiday pay calculated?

As an employee of the umbrella company, you are entitled to Statutory Annual Leave, which is equal to 5.6 weeks per year. This is equivalent of 12.07 percent of the hours you have worked.

What are employer pension contributions and how are they a benefit?

Employer pension contributions can give you the benefit of significant tax relief on your earnings dependant on rate and contribution up to a maximum of £40K per year, deducted from your pay at source and paid onto the provider of your choice.

What is auto enrolment?

Auto Enrolment is a government initiative and requires every employer of staff normally working in the UK to put their qualifying employees into a workplace pension scheme and to make contributions towards their employee’s pension, although each employee can make an independent decision to opt out.

Can I pay into a pension with SG Umbrella?

Under SG Umbrella you have 3 options:

  1. Opt out of all pensions under auto enrolment
  2. Pay pensions contributions into the NEST scheme under auto enrolment
  3. Pay into your own pension scheme – we can help with setting one up for you or we can pay the pension into an existing scheme you have. Keeping things all in one place.

What insurances are provided?

SG Umbrella Ltd will ensure their employees are protected with Employers’ Liability Insurance, Public Liability Insurance and Professional Indemnity Insurance. These are issued to your agency, will be included in your contract with our umbrella company and do not cost you anything extra.

What is Employers’ Liability Insurance?

Employers’ Liability Insurance will protect our umbrella company against compensation claims made by contractors in regards to illness or injury obtained in their place of work. It is a legal requirement.

What is Public Liability Insurance?

Public Liability Insurance will protect us against claims from the public if you have caused a personal injury or damage to property when working.

What is Professional Indemnity Insurance?

Professional Indemnity Insurance will protect us if somebody claims you have not provided the appropriate level of service as agreed. This can include what is perceived as poor quality work and inaccurate advice.

Can I claim expenses using an umbrella company?

Unfortunately, from 6 April 2016, HMRC confirmed that contractors working through umbrella companies were no longer able to claim tax relief on travel and subsistence expenses if they were subject to supervision, direction or control. In the eyes of HMRC, this was done to level the playing field and make things fair between full time employees and contractors (because full time employees are unable to claim travel and subsistence expenses).

You can still claim travel and subsistence expenses through an umbrella company if you are not subject to supervision, direction or control when carrying out your assignment or if they are billable back to the agency/client.

We provide a comprehensive expenses policy for reference.

Am I subject to supervision, direction or control?

HMRC believe a majority of contractors are under supervision, direction or control (SDC) in their place of work.  SG Umbrella ltd have an assessment process in place to make the correct determination on an individual basis.

What is supervision, direction or control (SDC)?

HMRC states that if a contractor is subject to supervision, direction or control, they are not eligible to claim tax relief on travel and subsistence expenses.

Supervision – when you are being overlooked at your place of work to make sure you are carrying out your tasks in accordance to your contract. If you are receiving assistance, advice or help from anyone in your place of work, this can also count as supervision.

Direction – when you are being given clear instructions, guidance or assistance on how to carry out your tasks.

Control – when you are directly being dictated to in the workplace and you must do as asked in order to correctly carry out your assignment. If you are asked to move from location to location (whether inside an office or externally), you are under control.

Do I need to keep the receipts for expenses that I am eligible to claim for?

You must keep all receipts that you are claiming expenses for.

Can I use an umbrella company even though I have a limited company?

You can use an umbrella company and have a limited company at the same time. Whilst you are using an umbrella company, your limited company will become dormant and no payments can be put through it for the same assignment.  The SG Umbrella service is included free of charge for all SG Accounting clients – meaning we can manage your ltd company and umbrella contracts all under one roof.

I recently was provided with a pay illustration from another provider offering a very high percentage take home pay, are they legitimate?

If you see a company offering you the chance to take home a high percentage of your pay, alarm bells should be ringing and you should be extremely wary.  HMRC is continuously looking to catch contractors that are using offshore intermediaries to lower their tax burden. You could be required to pay back all of the tax you owe, as well as pay significant fines.

Do I need to submit a personal tax return when using an umbrella company?

Usually, contractors using an umbrella company do not need to submit a personal tax return to HMRC because they receive PAYE and the tax and National Insurance Contributions (NICs) have already been made and recorded by your umbrella provider. However, you will be required to submit a tax return if you have an income of over £100,000, you have additional income (for example, from a rental property or investment) and if HMRC has personally requested you to do so.