An umbrella company acts as a single ‘portable employer’, and the contractor takes it with them to pay them for each assignment they undertake. Hence the term ‘umbrella’. They are employed by the umbrella company under an overarching contract of employment which covers them for all assignments.
As the employer we will ensure that the correct statutory deductions (tax, national insurance, pensions, etc) are calculated, deducted from their earnings and paid across to the relevant authorities each time we process a payment for them. There should be no tax return or any financial reporting for them to do at the end of the tax year.
In essence it is much the same as them having a permanent job.