Jargon Buster

Confused by PAYE Umbrella terminology? Simplify’s Jargon Buster will help you make sense of it all.

As with all industries there is a lot of different terminology that you might not have heard yet.  To simplify this jargon we have provided a handy guide to some of the words which you will hear when discussing Umbrella organisations.


“Overarching” Contract

This is a contract of employment that Simplify will give you, this will state what, whom and how you will work with us.


‘Bacs’ Payment

Bacs stands for Banker’s Automated Clearing Services. This is a payment that the bank will process from Simplify into your account. This normally takes 3 days to clear.


24 Month rule

This is a HMRC policy that states that once you have been made aware (i.e you have a contract to state) or you have been based at a specific site for more than 24 months this is no longer deemed as a temporary place of work and hence you are not entitled to claim business expenses (hence reduce the tax you pay). This is deemed by the HMRC as irrelevant who your employer is, it is the location that is important. i.e. you can’t change umbrella organisation to avoid this and hence continue to off-set expenses.


Our Margin

This is the charge that Simplify Business deducts from your wages to cover the cost of processing your wages. i.e calculating and paying your tax, NI and off-setting your expenses as well as completing final year returns.

Simplify Business charge £22.50 per week gross, or £80 per month gross. This includes same day payments into your bank and insurance.


Employers Liability Insurance

It is a requirement for all Employers to have Employers Liability Insurance. If you are a one person Ltd Company, you will still need to have Employer’s Liability Insurance in place.


Expenses

Please refer to our expenses policies which illustrate which of your business expenses, that have been incurred due to your work commitment, that can be offset against your tax liabilities. Please note that these expenses are not paid back to you they are in fact offset against the amount of tax that you need to pay down to a minimum wage.


Faster Payment

This is a payment that Banks will process from Simplify into your account. This normally clears on the same day. At the moment there are still some banks who do not have this option available. Simplify do not charge for this option.


Gross Pay

This is the amount that you earnt before any deductions have been made in regards to income tax, National Insurance and other statutory commitments. The calculation will be your pay rate times the number of hours you have worked.


HMRC

Her Majesty’s Revenue and Customs; formerly known as the Inland Revenue. They write, police and uphold legislation concerning tax.

They have a right to request receipts for your expense claims for up to 6 years. If you are found to have claimed incorrectly you could be subject to a re-payment order, interest charges and a fine.


Holiday Pay

As an employee you accrue holiday in the same way that other employees do. There are two options of payment for this. 1) You claim your holiday every payment 2) you set up a “holiday fund” (illustrated on your payslip in pounds and pence) and claim when you are not working.


IR35

On 9th March 1999, the Inland Revenue issued a press release detailing how they were to close the loophole that allowed freelancers and contractors to avoid paying large amounts of tax and national insurance by using a personal service company, composite company or business partnerships. This press release was called IR 35, and the legislation it announced has generally been referred to as IR35 ever since.

The government identified contractors as ‘tax avoiders’, due to the tax saving benefits they enjoyed from working through a Limited Company/Personal Service Company, whilst their underlying status was clearly that of a “deemed employee” The IR35 legislation was implemented in April 2000.

IR35 has resulted in increased tax, NI liability and administration for those contractors using a Limited Company IR35 made the use of Umbrella Companies significantly more attractive and more recent “Legislation to tackle Managed Services Companies” introduced in the Budget 2007 increased the appeal of umbrella companies further.


MSC

MSC stands for a Managed Service Company. This is a company that provides the services of people to other companies. These are now illegal as the contractor avoids paying tax as they claim dividends from the company. Simplify is not an MSC.


National Insurance Contributions (NIC)

This is a government tax that applies to all income. This is allocated to pay for public funded items such as the National Health Service and your State Retirement Pension. There are lots of different classes of National Insurance, as an employee of Simplify you need to be aware of Employees NIC which will be deducted from your pay along with PAYE, and also Employer’s NIC. The Employer’s Contribution is relevant to you when working through an Umbrella company as you agency will have allowed for this extra cost when they calculated your Ltd Rate. However, this contribution still has to be made to HMRC and this is one of the payments that Simplify will take care of on your behalf.


Net Pay

This is the amount that you are paid once Tax, National Insurance Contributions and processing fees have been deducted. This is the amount of money that is paid into your bank.


P45

This is requested by your previous employer to the HMRC which details your earnings to date in the financial year with your personal tax code. This needs to be presented to Simplify as soon as possible after joining us. If you do not have a P45 we can provide you with a P46 which will be sent to the HMRC in order to allocate your personal tax code.


P46

If you do not have a P45 Simplify will provide you with a P46 to complete which will allocate your tax code. There is normally a delay in this getting through the system and you will probably be paying “emergency” tax until your tax code comes through.


P60

This is a statement that Simplify Business will issue you at the end of the tax year (around April) which will record the tax and National Insurance you have paid over the previous financial year.


Payment Frequency

This is how often you are going to get paid. You will negotiate this with your recruitment agency.


Professional Indemnity Insurance

This insurance protects you against a claim made by your place of work. This allows compensation to be paid if you are found to be negligent or have made a mistake.


Public Liability Insurance

This insurance will cover you, if you are found to be responsible for personal injuries to a third party.


Self Assessment

This is a declaration made to HMRC which states what you have earned over the previous financial year.


Statutory Sick Pay

Simplify, as your employer, is legally required to pay you statutory sick pay after four consecutive days absent from work.


Timesheets

This is the record that you send to your recruitment agency detailing what hours you worked within a given time period. This is used by the recruitment agency to inform Simplify of what you have earnt.

Latest News
TESTIMONIALS
  •       Thank you very much for your services this past year, you have been really a really great company to work with and I appreciate everything you have done for me.

    Rhian O'DwyerCONTINUE READING »

  •       Since I have been using Simplify I have never had a problem with my money going in on time. That to me is simply the best thing for a Contractor. To be paid on time all the time. Whenever I phone the staff are courteous and friendly and always willing to help.

    Andrew GeogeghanCONTINUE READING »

  •       I am very happy with Simplify's service and would like to say a big thank you to Beth and the team.

    Stephanie Doue-Mai CONTINUE READING »

  •       Simplify made my first experience of contracting extremely straightforward. The staff could not have been more helpful. I would not hesitate to recommend them to someone just starting out as a contractor.

    Morag WishartCONTINUE READING »

  •       I would just like to say thank you very much for your services over the contracts I have used you for, you have always shown yourselves, to be prompt, reliable, professional, helpful and excellent value for money. I have recommended your services to a number of the colleagues I am currently working with who are currently paying more and not receiving same day payments, not surprisingly some of them are stuck in fear of change scenario, but you may get some interest in the future.

    Fraser SugdenCONTINUE READING »

CONTACT US

Tel: 01332 595959
Fax: 01332 650959

Chat Online

Simplify Business Ltd
St. Peters House,
Mansfield Road,
Derby,
DE1 3TP