What is an umbrella company?

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An individual or self-employed contractors might choose to work through an IR35 umbrella company rather than setting up their own limited company.

When a person joins an umbrella company they become an employee of that company and the umbrella company deals with all administration relating to the company, such as accounting requirements. The umbrella company also handles payroll and all related requirements relating to tax, pensions and National Insurance.

The contractor can work on contracts both inside and outside IR35 but those contractors that only work within it might elect to use an umbrella company to reduce administration.

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