Umbrella Companies Charge VAT
Do Umbrella Companies charge VAT?
Limited Company Contractors have to charge VAT on any income they earn. Often the client companies to whom they charge VAT can claim it back – unless they are financial companies.
Every few months the limited company contractor has to do his, or her, Value Added Tax returns and send the money to HRMC.
So, do Umbrella Company contractors have to charge VAT or do the Umbrella Companies charge VAT?
The answer is a bit of both, really. The Umbrella Company charges VAT to the client company on behalf of the contractors.
However, the contractor wouldn’t even see it at all – or may not even know that it is happening.
Umbrella Companies Pay VAT
One of the big advantages of using an umbrella company is that the contractor gets all his, or her, admin done for them. They can just concentrate on their chosen profession leaving it all to the Umbrella company.
The only input that the contractor has into the process is in sending the umbrella company the timesheets and expense claims. After that, the next thing the contractor notices is the money in his, or her, account.
The contractor supplies the umbrella company with the timesheets and expenses. The umbrella company then invoices the client company after adding on VAT. When it is paid to them they deduct the tax. That’s after taking into account the expense claims against tax and they pay it into the contractor’s account.
Contractors Using Umbrella Companies
They, then, send the tax and National Insurance money to HMRC. Just like any other company they pay their VAT to them as well. So, the umbrella companies charge VAT and pay it themselves.
This all passes the contractor by who doesn’t see it at all. So contractors using umbrella companies can rest assured that it is all happening as it should be and they don’t have to bother it at all.
This is one of the main advantages of using umbrella companies, i.e. contractors can concentrate on contracting and can leave the admin to umbrella companies.
For more information on Umbrrella Companies or to find the right one for you click on Umbrella Companies for UK Contractors.
