Sole Trader, LTD or umbrella company. Help!

925dancer

I am starting a new job a week on Monday and for the first six months or so I will be paid as self-employed. They have said that everyone will be made PAYE at some point in the not too distant future once company restructuring has been completed.

So, being a complete novice I need to know what will be most beneficial to me in the meantime as a self employed contractor.

My starting salary will be £23k paid over 44 weeks. This will be reviewed initially at 3 months so may get a rise quite quickly.

I'm a bit lost as at first I was confident I would just go with an umbrella company to save myself any headaches but then speaking to someone in the new office, he does his as a LTD company and says it's fairly straight forward if you are good at admin (my background) and have an accountant do your end of year bits and pieces.

I am very much a novice at all this and don;t really know where to start so any help, in the simplest possible terms that this accounts simpleton can understand would be very much appreciated.

LittleVoice

I would just be wary of an organisation which tries to get workers to be self-employed when it appears the positions are actually those of employees.

hethmar

Sounds a bit iffy to me. Speak to an accountant for advice.

patman99

Sounds like they may be in breach of HMRC Rule 35 to me.

If you go S/E make sure to pay Class 1 NIC's as at least if it all goes Pete Tong, you will be entitled to the same benefits as someone on PAYE.
If you pay Class 2 NIC's, then you can only get Income-based JSA and would have to work as PAYE for 2 clear years to reset the balance.

If you opt for LTD company status, you will become a Director and will have different tax problems to deal with.

paddyrg

I would be wary of this company - promises that you'll be 'employed' in 6 months, but they want you to do a 44-week (more than 6 months) job at a fixed fee? It doesn't smell right. Pure speculation of course, but do make sure you check it out closely.

Savvy_Sue

LittleVoice wrote: »

I would just be wary of an organisation which tries to get workers to be self-employed when it appears the positions are actually those of employees.

patman99 wrote: »

Sounds like they may be in breach of HMRC Rule 35 to me.

If you go S/E make sure to pay Class 1 NIC's as at least if it all goes Pete Tong, you will be entitled to the same benefits as someone on PAYE.
If you pay Class 2 NIC's, then you can only get Income-based JSA and would have to work as PAYE for 2 clear years to reset the balance.

If you opt for LTD company status, you will become a Director and will have different tax problems to deal with.

paddyrg wrote: »

I would be wary of this company - promises that you'll be 'employed' in 6 months, but they want you to do a 44-week (more than 6 months) job at a fixed fee? It doesn't smell right. Pure speculation of course, but do make sure you check it out closely.

what they all said, only they put more detail in than I could have done.

PlutoinCapricorn

If you are self employed, you should be getting at least 1/3 more than an employee doing the same work would, to cover lack of holiday pay etc. Does this apply here?

I agree with everyone: this does not sound good.

SteProud

I work for an umbrella company and a specialist contractor accountancy practice and we usually recomend to the contractors coming to us that if you are arning around £35K or over you are definitley better off.

Don't forget, if you decide to work via an umbrella then you will be asked to pay employers' NIC as well as employees so this should be reflected in your rate.

There are some legitimate expenses you can have offset against your tax liability though working via an umbrella which can improve your take home pay.

scheming_gypsy

To be honest i can't see the issues that the others have said...

what it sounds like to me is that it's a temp to perm role; your first 6 months will be as temporary contractors where you invoice the company and you pay your own wages and when the 'company restructure' is done they'll be employing full time. If they're 'employing' you direct as self employed then they're cutting out the middle man of using an agency and paying their fees.

InsideInsurance

Its more worrying that they are willing to take on a contractor as a sole trader than the fact they are wanting to use contractors in itself.

Speak to an accountant in the first instance, most will give you a free initial session. Make sure however that the accountants in question have significant and recent experience of IR35 (ie they have lots of contractors on the books) as this is a difficult piece of legislation that is still evolving and you need to get it right as its very costly to get it wrong.

scheming_gypsy

InsideInsurance wrote: »

Its more worrying that they are willing to take on a contractor as a sole trader than the fact they are wanting to use contractors in itself.

.

Looking at their first (and only post in here) it's only the thread title that mentions sole trader. Everything else is umbrella or self employed so i thought that was a bit of a red herring or a misunderstanding on what's wanted of them.

But with it just being for 6 months i think the umbrella company would be the best way to go about it. For Ltd company it's setting up a company, doing your own invoices, paying wages and having an accountant do your tax etc, before folding the company. If they leave the company running when they go PAYE they'll probably get a BR tax code in April as their company is their main source of income.