According to the latest figures, the recession that is ravaging southern Europe has now firmly breached UK shores, with the GDP growth dropping by a shocking 0.7% in the last quarter. With the sorry state of the economy, it has become all the more important for businesses to save as much money as possible. Consequently, many contractors have turned to umbrella company services to cut costs and reduce administrative responsibilities.
The negative sentiment in Europe has swept through UK, despite the bonhomie surrounding the Olympics. Reduced GDP growth has threatened to slip the country into another quarter of negative growth, which would make it the worst double-dip recession in the country in the past 50 years. With income tax changes announced earlier in March this year, many contractors in the sub 40,000 pound category might find themselves placed in a higher income tax category, adding to the already heavy financial strain on the lower-middle and middle class.
Umbrella company services are a boon for contractors in such an economic climate. Unlike a limited company, in an umbrella company, the company and not the director is held liable for all the administrative and financial duties. Thus, a contractor can take the help of a umbrella company service to take care of the VAT, accounting, and legal liabilities related to his work, without incorporating as a limited company. This saves significant expenses, time and energy that would otherwise be spent on hiring lawyers, accountants, and taking care of the day to day running of a company. The contractor can focus on running his enterprise and increasing revenue rather than the administrative functions of the company.
In the short-term, umbrella services are a very viable and cost effective alternative to the more traditional limited company. In the current inclement economic climate, more contractors will turn to umbrella services instead of incorporating as a limited company. Contractors must be careful to align themselves with umbrella services of repute. Market reputation, cost, and experience in dealing with turbulent economic conditions are some of the pre-requisites for selecting any umbrella company service.
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September 13th, 2012
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