AlexM

I think an umbrella company is the way to go these days, especially if you are IR35-caught. At least, it is if you are as crap at keeping up with your paperwork as I am!.

Some of them run erm... 'tax efficient' schemes too, which might be worth researching for yourself.



Cheers,

A.


[Edited by AlexM - 12/10/2002 12:05:04 PM]

carl

I wouldn't -- a copy of Sage Instant Payroll is £99 and it only takes me 20 minutes of processing a month (including waiting for the reports to print out )

Go 'Limited' and be in control of your own destiny. It'll be a steep learning curve at the start, but rewarding.

A copy of Sage Accounts is another £99 and will do all your VAT returns with a single button push. There really is nothing complicated about it -- as long as you record all your transactions your accountant will be able to sort it all out if you go wrong. Your accountancy fees (providing you haven't screwed up your accounts ) should be substantially less than 1-1.5k -- I'd say about £500. £1 million PI insurance plus employer's liability, public liability, etc. is about 500 from Coulson Pritchard.

[Edited by carl - 12/10/2002 12:39:52 PM]

TonyBurns

iTrader: (3)

As my new job is a contract i have the option of becoming a limited company or staying PAYE, at this moment im not sure which is best and am looking for some advice about it from people who have become Limited as to speak
Any advice offered will be greatfully received

Tony

Devil's Refugee

I'm a Ltd Co mate.
Start up costs are about £120 for Co Name registration, then on top you may need Indemnity Insurance for the Contract.
Then it's basically find a good and cheap accountant and pay your VAT, NatIns and Tax.
If you can cope with the paperwork, IR35 foibles, and reign in the desire to spend the whole lot, then go for it.

Otherwise, PAYE is Ok, since it's done for you, no hassles.

Also, try and get examples of other contracts people work to, it pays to beg, borrow and steal clauses to make it as watertight as possible.

springbok

Pre IR35 ruling then a limited company was the way to go, big way of paying less tax.
Nowadays it is not as easy, but as said above if you can find a good accountant then it's still better than PAYE.

TonyBurns

iTrader: (3)

Having worked it out with the accountant she said that i would be better going PAYE to start with under an umbrella company (i pay 2.5% of my earnings to them) but they get me all my tax benefits back (which is handy ).
I'll have to wait and see after the first few months before i go limited though, PAYE may be better in the long run.

Tony

P20SPD

iTrader: (1)

Tony, what line of business are you in? Just you dont always have to have everything water tight re IR35.

Will you be contract working for 1 client only?

I personally am not convinced by these Umbrella companies, and AFAIK, there WILL be legislation to stop these type of companies etc operating.

It would be interesting to know thats all.

If you have any questions then mail me as per profile

Steven

AlexM

No, there won't be legislation to prevent composite companies being formed. The tax legislation will always be adjusted to maximise tax revenue w.r.t. tax avoidance, which is not the point of most composite companies anyway. It should be stated that an umbrella or composite company cannot be used as a vehicle to avoid liability under IR35 (well... not as a structure in itself).

The main concern is that it is another intermediary that your money must go through before it gets to you, and there a risk of the umbrella company going under if it isn't properly run.

If you are IR35-caught, you can only claim tax relief on business expenses to a maximum of 5% of turnover in any case - the rest is 'deemed income' and subject to employers / employees NICs.

I would think that 2.5% is reasonable for payroll, given that you would probably be paying approx 1-1.5k for accountancy services and would still have to deal with VAT returns, and other admin stuff.

Cheers,

Alex

ajm

is there any online or other literature on starting your own company? I too am interested in this, but would like a check list of everything that need to be done to accomplish it.

Devil's Refugee

Check out www.contractoruk.co.uk

A wealth of information and useful hints, tips and links for anyone starting out.



And remember to network guys, sometimes a former colleague or contractor you've worked with will be more useful than those lazy b@stard agencies !

T.J

Alexm,

E.B.T schemes run by umbrella type companies et al have, IIRC, been nobbled by one Mr Brown at No 11 following his most recent diatribe affectionally known as the 'Budget speech'

There is a company that will vet your contract for likelyhood of being caught by IR35 (read: taxed to ****). If they say your exempt and the Revenue disagree they cough up the tax owed.

Tony

father_jack

Yeah - thats Qdos http://www.qdosconsulting.com/ I joined the Route35 which gives you free specialist employment lawyers if you get investigated for £100. I also got the IR35 insurance where they check your contract and if it passes, they will pay your IR35 liability - costs about £400. **** em and their law
But join the PCG also, www.pcg.org.uk

Pavlo

I know P20SPD isn't convinced, but I just started contracting through Brookson, www.brookson.co.uk.

Also important, is indemnity insurance, IR35 investigations can be covered by this also.

If you set up yourself as LTD, get more than one client. If you can, trade services, if you're an IT guy, bill your accountant for some IT work and they can bill you for the same amount of accountancy or something like that. Not that I'm suggesting you start commiting fraud!

The thing about the umbrella company is that your dividend payment comes out of the work of many people, not just your own.

Quite how the goverment are going to nobble this I'm unsure, but i would be interested to see any up and coming measures/legislation.

Paul

AlexM

I agree with all of the above, and there is some good advice here.

One point though.. an umbrella company has a financial liability to you (the employee) such that they have to honour the terms of their agreement with you (i.e. pay you) regardless of them being payed or not. There is a cost of capital for borrowings required to bridge this gap, and this is where a portion of their margin goes (costs).

Having said that, you can negotiate - I got 1% off simply by asking, which implies that they are more than covering costs .

BTW, learning a simple book keeping package ins't a substitute for professional, reliable advice w.r.t. tax and other fiscal matters... that is usually worth paying for, which is how accountants justify their fees (or so they say).

If you do go the limited company route, get your contract vetted (as mentioned above), invesitgate ways of documenting more than one client etc etc.

Personally I would evaluate all of the options before doing this, and milk the loopholes until they are all closed... there are other options apart from EBTs...

carl

'Documenting more than one client' is no good. The IR will investigate each individual contract for IR35 compliance, so you may end up compliant on one and non-compliant on another. On top of that, it's not the contracts themselves that are investigated, but the actual working practices. So anyone who sells/distributes/offers an 'IR35-compliant' contract is having you on.

gravelexpress

First of all I`m glad to see that people are sticking 2 fingers up to IR35.

I bottled out of my limited company for two reasons one being IR35 the other being the difficulty In obtaining PI insurance (Professional Indemnity). Not neccesary in order to form a company - But consider that as a company you may expose yourself to Liabilities that could cripple you, depending obviously in line of expertise.

I agree with the advice on a payroll software package and something that does your VAT return. AlexM you are 100% correct that this does not substitute the advice of a chartered accountant - However his fees will be a lot less when you undertake all the book keeping - and you use him to file your return.

Something that you will have to get used to is the bloody self assesment that you will recieve until your dieing days - once you stray from PAYE.

I have never used an umbrella company - however my brother uses an "offshore" company. Which seems to be highly recommended - but somewhat on a knife edge as regards tax liabilities.

Once you set up Limited you get the advantages of managing all of your money - and the main benefit that you will see is only paying the lowest level of NI - because you pay yourself mimmum wage and the rest in Dividends.

Of course if you want to make a big killing - set up Ltd - dont pay the tax - dissolve the company - and "disapear" to a middle-east tax free state for a year or two!!!

NOT THAT I COULD ENDORSE THE LAST STATEMENT OBVIOUSLY

carl

I get my accountant to do those for me too