Tuesday Tidbit – Best way to pay your contractors, PAYE or Umbrella/Limited Companies


This week we were asked by a permanent agency who was starting to look into contract recruitment what the best ways were to pay the contractors. We advised that the 2 best methods were to pay either PAYE or using Umbrella/Limited companies and advised against paying contractors via self-employed companies.

The agency asked the reasons why and we explained that when a contractor is paid PAYE the agency handles the tax and NI for the candidate; when the candidate is using an umbrella/limited company the responsibility for the tax and NI is transferred to the director of the company; but when you pay to a self-employed company there is no director to pass the responsibility onto.

Therefore if the self-employed company decides to not pay any tax then HMRC can come back to the agency as the last directors to make payment and ask them to pay the tax instead. The agency was grateful for the advice and they decided to ensure that their contractors were never paid through a self-employed company.

Do you want to know of some Profitable Reasons to Hire Contractors?, look no further.

If you want advice in relation to paying your contractors contact TBOS today on 0845 8811 112