Supply Teachers & Umbrella Companies

I have recently received the following question with regards to supply teachers and how it works if they are to work through an umbrella company, so I thought I would share the answer.

This site looks great, I’m encouraged to find someone trying to sort out the good from the bad in regards to umbrella companies. I was wondering if you have dealt much in the past with umbrellas in regards to supply teachers. My wife has been a supply teacher in the past, and was considering doing it again. I was hoping she could be self-employed and contact the schools directly. From what I can tell, it would seem that a school would want an invoice via a limited company, and so having to use an umbrella is likely.
What I can’t figure out is how joining an umbrella company allows supply teachers to submit expenses? Is there any specific regulations you know of that outlines the difference?
What I’ve read states that supply teachers will be considered to be employed by the schools?
Does that impact expenses?
Does something like the below seem legal to you, an anecdote from TES, a teacher discussing signing up to an Umbrella:
“I worked for [My Key Payroll] for 6 months, they were great! I was paid double what I am now as a school contracted teacher. I travelled 100 miles a day, so the benefits of claiming expenses was fab. I was in 1 school for those 6 months as PPA teacher, then the school took me on from September.
So I’d recommend them!” http://community.tes.co.uk/tes_supply_teaching/f/62/t/555773.aspx
Thanks so much for your time.
Apologies if this is unclear.

OK let me explain:

There are no special rules surrounding supply teachers with regard to claiming of travel expenses; tax relief on travel expenses can only be claimed if an individual is travelling to a temporary workplace. If a teacher is engaged by a school for a fixed period of time, this will be considered, by HMRC, to be a permanent place of work for the duration of the assignment (http://www.hmrc.gov.uk/manuals/eimanual/eim70755.htm).

However, an individual working through an umbrella company will be employed under an overarching contract of employment which creates continuous employment across many different assignments. For instance, a supply teacher could work for 2 months in one school and then move to another for a month and, although she will have worked on 2 separate assignments, the continuity of the employment with the umbrella company would not have been broken. What constitutes an overarching contract of employment is complicated and if an umbrella company does not have the correct contract in place the workplaces of their individual employees would not be considered to be a series of temporary assignments and therefore there would be no tax relief allowable on the cost of travel.

For a more detailed explanation on how an overarching contract works please click here.

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