umbrella companies

chemistryboy

I am about to start supply teaching with an agency. I have been offered an umbrella company to process my pay, deductions etc but more importantly they claim to be able to off set tax against various expenses. My research on HMRC suggests that this practice is not allowed. Obviously I do not want to go down this route only to get a big tax bill later on. I would appreciate some advice please

Notmyrealname

At the moment it is allowed. You are an employee of your umbrella company which is a subcontractor of the agency.

Have a look at this site and pop your numbers into this to see if its worthwhile.
https://www.novacontracting.co.uk/employee/Calculator.aspx

chemistryboy

It may be allowed because HMRC have not got round to dealing with this issue but EIM 70755 says otherwise. I do accept the logic that I would be employed by the umbrella company and subcontract to various schools but by the same token could I just go self employed and cut out the umbrella company.
Thankyou for the link and your help

System

It depends on whether the agency are willing to deal with a self employed rather than umbrella or limited.

I know that in the IT contracting world in the vast majority of cases the agencies will only deal with umbrellas or limited.

You will need to check with the agency

Don't forget that as self employed you will also be responsible for your own liability insurances.

chemistryboy

Thanks for that I will make enquiries

Notmyrealname

chemistryboy wrote: »

It may be allowed because HMRC have not got round to dealing with this issue but EIM 70755 says otherwise. I do accept the logic that I would be employed by the umbrella company and subcontract to various schools but by the same token could I just go self employed and cut out the umbrella company.
Thankyou for the link and your help

If they will deal with you direct this is by far the best way to do it especially if you can keep simple accounts which an accountant would charge you around £250 to go over compared to over £1000 the umbrella company fees would be over a year.

If you are going to various schools but through one agency then you are no better off under potential IR35 breaches as your client is the agency and not the schools so you effectively only have one customer.

chemistryboy

My intention is to spread my net over several agencies and see which one(s) gives me the most work. I have not worked as a self employed contractor before but I know my way around an excel spreadsheet and I am sure I can keep accounts but do I need to employ an accountant or can I deal with the taxman by way of self assessment or am I wanderiing into 'shark infested water'?
The 2 umbrella companies suggested to me are ISS Ltd. and i4 do you have any knowledge or experience of these companies?

Notmyrealname

You can do it yourself. As a sole trader earning under £70k it is ridiculously simple merely needing to give a single figure for income and a single figure for expenses without having to break it down. Just file the return online.

The only pitfall is not claiming every tax deductible expense and allowance you may be able to so you'd pay more tax than you need to and also as tax credits are calculated on profit and not gross income, you could be getting less than you're actually entitled to. However if you can navigate the HMRC website there is a ton of help on there about allowances.