Shedding light on industry terminology

Jargon Buster

Whether you are new to the world of contracting or you are a seasoned freelancer you will find a vast array of industry terminology.

To help, we have created a Jargon Buster to give a brief outline of the terminology you are likely come across.


Auto-enrolment is a Government initiative to help more people save for later life through a pension scheme at work. Legislation is now in place that ensures employers automatically enrol their eligible workers into an approved pension scheme. Workers will have the option to “opt out” of the pension scheme, but will need to continue to “opt out” each year to avoid being automatically included at a later stage. Lesters operates a group personal pension scheme, provided by Scottish Life. Our scheme meets the new 'auto-enrolment' regulations.


Bookkeeping is the recording of financial transactions and is part of the process of accounting in a typical business.

Business expenses

Business expenses are the cost incurred due to your work commitment. In order for your expense claim to be deemed valid the cost to you must have been incurred wholly, exclusively and necessarily in the performance of your business activities.

Chargeable Expenses

Chargeable expenses refer to expenses which the agency or end client has agreed to reimburse. Typically the Umbrella company invoice the agency for these expenses which in turn are reimbursed to you in full. Lesters will not deduct any administration fee or margin when processing the reimbursement of chargeable expenses.

Childcare Vouchers

Childcare Vouchers are a Government-approved and tax efficient way of paying for childcare. Workers who opt to join the scheme can exchange up to £243 a month of their gross salary for childcare vouchers. The part of the gross salary exchanged for childcare vouchers is tax-free and exempt from National Insurance contributions.


A dividend is the distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. When a company earns a profit it can either re-invest it in the business (called retained earnings), or it can distribute it to shareholders as a dividend

Employee Benefit Trust (EBT)

An Employee Benefit Trust is a way to provide employees and directors with specific kinds of benefits such as loans, shares in their employing company, pensions and other retirement benefits, accident benefits or healthcare benefits. In the freelancer and contractor industry they have been used for avoidance purposes, with the aim of providing the workers with benefits in ways that aim to minimise or avoid liability to income tax (and PAYE) and employers’ National Insurance Contributions (NICs). Typically these schemes would require the contractor to assign their contract to the offshore provider who, in turn, would pay the contractor a low fixed salary with the greater remainder part of their remuneration package paid out as a loan from an offshore EBT. The loans would be properly reported as a benefit-in-kind but the tax paid on the beneficial loan interest by the contractor would be minimal compared with the tax and NIC that would normally be paid. The scheme hinges upon the fact that the loan would not be written off nor an intention for the loan to be repaid by the contractor, thereby escaping a large tax charge. HMRC does not like the use of EBT's and continues to clamp down on the abuse of EBT's to avoid tax. Lesters does not promote or operate such schemes.

Employers' Liability Insurance

Employers' liability insurance provides cover against claims by employees who have suffered an injury or illness in the course of their employment. The Employers' Liability (Compulsory Insurance) Act 1969 (ELCA) makes it compulsory for employers to have employer's liability insurance.

Gross Pay

Gross pay is the term used to describe pay before any deductions of tax, national insurance and other statutory or non-statutory deductions are made.


Her Majesty’s Revenue & Customs (HMRC) is a non-ministerial department of the British Government primarily responsible for the collection of taxes and the payment of some forms of state support. HMRC was formed by a merger of the Inland Revenue and Her Majesty's Customs and Excise and came into formal existence on 18 April 2005. Lesters use HMRC approved payroll software to ensure that we follow guidelines set by HMRC in the calculation of all taxes and National Insurance Contributions.

Public Liability Insurance

Public liability insurance is the most common type of insurance taken out by small businesses and would cover a business if a customer or member of the public was to suffer a loss or injury as a result of its business activities and if that person made a claim for compensation. The insurance would cover the compensation payment plus any legal expenses.

Timesheets & Invoices

A timesheet is a document used to record the number of hours/days that an employee has worked. In the freelance and contractor industry the agency will obtain a signed timesheet from the end client before issuing a payment to the Umbrella company or contractors limited company. The Umbrella company will collate the information from this timesheet with the details provided by the worker and generate an invoice that is delivered to the agency. An Invoice is effectively a payment request.


VAT, value added tax, is a sales tax which is charged against certain goods and services. All VAT-registered businesses in the UK need to account for VAT. Your company will charge VAT on the invoice which is produced to your agency or end client for your time worked. The VAT element of this is then payable to HMRC via your VAT Return.

VAT Return

If you're a VAT -registered business you must report to HM Revenue and Customs ( HMRC ) the amount of VAT you've charged and the amount of VAT you've paid. This is done through your VAT Return which is usually due every 3 months. You may want to appoint an agent to deal with HMRC on your behalf.