Contractor Umbrella
In the UK, an umbrella company acts as employer to independent contractors who work under temporary contract, usually through a specialist employment agency. Recruitment agencies will only issue contracts to a limited company. Since the introduction of the Managed Service Company (MSC) legislation in the budget 2007, the only way an independent contractor can comply with this requirement is by setting up their own personal limited company, use an umbrella company or use a similar service as the one offered by AML. AML is not and will never be an Umbrella Company or an Umbrella Company provider due to the product that they offer and this helps protect them against any legislation that may be applicable in relation to Managed Service Companies. When contracting through AM Limited ("AML") you will be employed by AML under a Contract of Employment. The business model that AML operates ensures that you will take home over 80% of your gross contract value. AML ensure that any employees contracting through AML are fully covered for professional indemnity, public liability and employer’s liability insurance. AML ensure that fully IR35 compliant contract negotiations are carried out so that employees are not caught by IR35 legislation. AML’s business model is IR35 and s660 compliant. It is endorsed by leading Tax Counsel, has been fully disclosed and registered with the HMRC (with a Scheme Registration Number) and is registered for PAYE. All aspects of the AML Scheme have also been verified by leading Employment Counsel.
How Does It Work In Practice
All AML employees are employed under a contract of employment and are paid a salary that is subject to UK PAYE and national insurance contributions. As a result of their employment, AML employees are entitled to receive discretionary awards from AML's Employee Benefit Trust.The Trust has been set up by AML for the sole benefit of AML's employees. It has independent Trustees that are able to make discretionary awards to AML's employees (the beneficiaries) in the form of an interest-free loan as a result of their employment.
Any awards being made out of the Trust in the form of a loan to employees are taxable under the Beneficial Loan Rules as if the benefit were provided by the employer (Benefit in Kind). An individual will pay tax on the HMRC assessed benefit which is the official rate of interest, currently 6.25%. This amount will then be taxed at 22% or 40% depending on whether the individual is a basic or higher rate taxpayer, giving an effective rate of between 1.3% to 2.5%.
This structure results in AML employees enjoying an income of over 80% and in some cases 85% of their contract value after payment of all tax and costs.
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