help umbrella contracts!!!!!!!!!!!!

julie8314dave

My husband has just started a 6 month contract with the council job finishes in december, he has gone through an agency who have made arragements for an umbrella company to offer there admin services,

they state that they will deal with the tax and national insurance any expenses by ofsetting his expenses,
They have asked for a monthly fee from him of £55.00 can any one tell me if it is worth it? do you have to have it? what could or will happen if he does not use this service.

He will be working 40 hrs a week at £7.81 an hour does anybody know how much he should put away a week please.

Kindest regards.

Penniesmakepounds

julie8314dave wrote: »

My husband has just started a 6 month contract with the council job finishes in december, he has gone through an agency who have made arragements for an umbrella company to offer there admin services,

they state that they will deal with the tax and national insurance any expenses by ofsetting his expenses,
They have asked for a monthly fee from him of £55.00 can any one tell me if it is worth it? do you have to have it? what could or will happen if he does not use this service.

He will be working 40 hrs a week at £7.81 an hour does anybody know how much he should put away a week please.

Kindest regards.

You may be better off getting further advice on this from HMRC before committing quite a chunk of hard earned cash for someone else to do it for you.
http://www.hmrc.gov.uk/sa/register.htm

paddyrg

This is probably because the council need to make sure there is no possibility of him appearing as 'employed' on their books (which triggers extra pensions, holiday entitlements, etc), so want to pay a fixed fee to a ltd company, and all the holiday entitlement etc becomes the problem of the contracted company.

£55/month isn't outrageously expensive as these things go, I had a similar service for £75/month once, but back then there were distinct tax advantages to it, and I was making a better daily rate. That said, £55 to be able to earn £1200 (before tax/NI) is better than a kick in the teeth, and setting up a ltd company and doing your own accounts will add up to more than this.

Russe11

to be using a umbrella company on a hourly rate of 7.81 is a waste of time in my opinion, better off to take a lower hourly rate employed.

To be selfemployed using a umbrella payment solution you really need to be earning double that with a decent amount of expenses, lots of travelling for example.

Russe11

Penniesmakepounds wrote: »

You may be better off getting further advice on this from HMRC before committing quite a chunk of hard earned cash for someone else to do it for you.
http://www.hmrc.gov.uk/sa/register.htm

Umbrella companies won't pay gross, if they did it would mean there was no point to them.

InsideInsurance

Given the situation I dont think you will have much choice. The rate for doing the work as a contract is fairly low and so not worth the hastle of forming a limited company and going through the pain that is IR35.

Umbrella companies are more to do with IR35 legislation than being lazy about having to do your own returns. It may be that they will accept him as self employed rather than as a Ltd company or via an umbrella but I would be surprised.

Shop around for umbrella companies though, rates vary a lot as do T&Cs about notice periods and if you have to pay if your not working for a particular week etc.

You will find a lot of schemes saying they will get you 85%+ of your hourly rate but always be very cautious with these, many are in the grey area of the law and an investigation by HMRC costs thousands even if everything afterwards is found to be above board.

scheming_gypsy

When he uses an umbrella company he becomes 'staff' for them so his wages have already had tax and NI taken out so he won't need to put anything away.

Although £55 isn't too bad, i pay £25 a week.. it's high but i come out with the same amount after tax as ones offering the same service for less money.

julie8314dave

Thank you every one for your replies, still not sure what to do. one company keeps ringing a couple of times a day to get him to sign up with them. i have pasted what they have said and i still can not get my head around it maybe some one else can.

If my husband just does a self assesment when tax is due will this be sufficent as the job ends dec 23rd 2011 and when would he have to submit and how much on his earnings.

Variable Data

Personal Allowance 7,479
Tax Code 747L No of periods per annum 12
Agency Payment(pre-uplift) £ 1,000.00 Admin Fee 55.00
Payment Frequency Monthly Insurance Charge 0.00
Estimated Expenses £ - Agency Uplift 25.0%
P.A.Y.E £ Umbrella Solution £
Gross Salary 1,000.00 Income from Agency 1250.00 A
Income Tax 75.35 Expenses 0.00 B
Employees NIC 47.75 Admin Fee 55.00 C
Net Salary 876.90 Insurance Charge 0.00 D
Employer's NIC 73.45 E
Taxable Pay (A-B-C-D-E) 1,121.55
Gross Salary 1,000.76 P
Holiday Pay 120.79 Q
Total Pay (P+Q) 1,121.55 R
PAYE 99.66 S
Employee's NIC 62.34 T
Net Salary (R-S-T) 959.56 U
Net Payment 8 76.90 Net Payment (U+B) 9 59.56
Contractor Increase 82.66
vs. PAYE
Personal Illustration for

---

Azebra Umbrella Limited
Langley Place
99 Langley Road
Watford
Hertfordshire
WD17 4PE

scheming_gypsy

if he's going through an umbrella company he doesn't have to do a self assessment as he's an employee of the umbrella company and getting paid PAYE from them, so his tax and NI has already been paid when he gets paid. When he gets paid then all is his.

Azebra's website explains it all http://www.payflexltd.co.uk/umbrella.asp
Although it does look a bit tinpot.

Although i can't make much sense of the breakdown, with it all being together it's hard to pick out what's what. What i think i can make out is that on PAYE he'd take home £876.90 but going through the umbrella / Azebra, he'd take home £959.56

julie8314dave

Thanks for reply,
If he did not go through the umbella company can he just submit a form to hmrc when tax is due. and if so on his earnings how much would he have to put aside please?

Would it be benifical on these wages to go through an umbrella co as he only works 1 mile from home and takes his own lunch in.

Also not sure how tax things work, can he earn £7,495.00 without paying tax or does he just pay it and claim back.

Thanks.

InsideInsurance

If you are self employed you pay your NI Class 2 up front as you go but the income tax is paid annually in a lump sum after informing HMRC via your tax return (ie you dont pay it then claim it back).

Being self employed is not going to bring you any tax advantages over using an umbrella and creates risks for both him and the organisation of being caught by the IR35 legislation. As a SE person it would have minimal impact on him but would be significant for them hence I would be slightly surprised if they accept this option.

There are advantages to going down the Ltd route if you can ensure you are outside of IR35 but corporate returns plus self assessments for all directors etc is onerous and generally people employ an accountant for that reason. A small business you could get done for £750 a year but on low earnings it possibly doesnt stack up.

IR35 is a piece of legislation which was designed to stop companies and contractors structuring B2B relationships (which pay much lower tax) when the reality is that the "contractor" is for all other intents and purposes an employee.