Self Employed or Umbrella Company

janeskejacobs

I am employed by an agency as a contract worker. I was promoted and now I was told that I have to use an umbrella company. They currently charge £30 a week just to run my payrol, I do not get paid holiday and thus my salary is based on 52 weeks so if I don't work I don't get paid. No sick pay either. Will it be more benificial for me to then be self employed and do my own tax return on line when required and not use the umbrella company at all? What can I claim for in terms of expenses if self employed? I am an office worker and I drive. Currently, the expenses through the umbrella company is very limited and they have cut back even more now. Please help.

chrismac1

On the face of it this seems a high rate, worth getting like-for-like quotes from some of the industry leaders such as DanBro and SJD.

IR35 - I am sending you a link on this. Note that though it is still law, HMRC have been given a right good hiding on it and the tax take is minimal. The latest noises from Cameron and Clegg is that we may be moving to General Anti-Avoidance rules used by countries like Canada and New Zealand who looked at what HMRC were doing on IR35 and correctly deduced it was a bag of knackers.

Operating a limited company is another option. Assuming "box standard" affairs, expect to pay between £800 and £1,000 per year for this, plus VAT. Sending you another link on this.

bah_humbug_2

Just spoken to our accountancy/legal boffins -

Avoid umbrella like the plague - rip off - selling you something you can do yourself.

Short term - self employed - invoice the company and do self assesment when time comes - taking into account any benfits recieved - earnings from contract work and and any payroll.

Longer term - set up Ltd company (£75 ish - company I work for can actually do this if you want any help drop me a PM)

Mentioned HMRC Contractors Scheme - whereby you ring them for a Contractor Number and they deduct tax at source. It seems employeers are not very familiar with this.

If need any clarification let me know as just passing on info - can get more detail.

pjclar02

bah_humbug wrote: »

Mentioned HMRC Contractors Scheme - whereby you ring them for a Contractor Number and they deduct tax at source. It seems employeers are not very familiar with this.
.

Hi there

Sorry for going off piste slightly but I'm quite interested to know what this is; if you or your colleagues have further information. Are you talking about the CIS scheme?

Many thanks

Murdina

The only situation in which "employer" can legally take off tax other than PAYE is CIS - construction industry scheme.

It is not a generic scheme which can be applied anywhere and beware of any organisation purporting to take off your tax for you and account to HMRC if you are neither an employee nor in the construction industry. You will be joining some sort of umbrella or LLP scheme where they may indeed withhold and even remit your tax for you but that it is entirely a personal matter between you and them and if they go bust meanwhile you get no credit for the tax.

bangersnmash

bah_humbug wrote: »

Longer term - set up Ltd company (£75 ish - company I work for can actually do this if you want any help drop me a PM)

Or you can do it yourself for £20 using Companies House which generally will be quicker than using a third party as they tend to dawdle unnecessarily and spin it out for a week or three to pretend to make a reason for charging you lots of money for the very small amount of admin that it takes to do it :

http://www.companieshouse.gov.uk/infoAndGuide/companyRegistration.shtml

qwertyjjj

Are you allowed to be self employed when getting hired via an agency? Even though the agency are just the "finder of workers", don;t they have to pay employer NIC if you get employed?

I heard most companies require you to be LTD or umbrella though I can't see why they should turn down self employed if it is a fixed contract? You can always go LTD after can't you?

pjclar02

They don't like to take on the self-employed, because in the event of an HMRC PAYE investigation, if that individual has the hallmarks of an employee, HMRC will pursue the employer for any PAYE that should have been withheld.

If you operate via a limited company, it passes the PAYE risk on to your limited company, via the intermediaries legislation (IR35).

Depending on the agency, there will probably still be an expectation that you operate as a limited company. If not, then you will be an employee of the agency, and they will operate PAYE.

qwertyjjj

pjclar02 wrote: »

They don't like to take on the self-employed, because in the event of an HMRC PAYE investigation, if that individual has the hallmarks of an employee, HMRC will pursue the employer for any PAYE that should have been withheld.

If you operate via a limited company, it passes the PAYE risk on to your limited company, via the intermediaries legislation (IR35).

Depending on the agency, there will probably still be an expectation that you operate as a limited company. If not, then you will be an employee of the agency, and they will operate PAYE.

If you have a fixed term contract of say 3 months or 6 months, I'm not sure how the HMRC could class that as PAYE?
Although I suppose it's risk as you say...as the employee probably doesn't provide their own equipment, etc.

Secondly, if you set up a LTD company, how quickly can it be wound down?
Presumably there are regular monthly accountant fees to pay?

Pennywise

qwertyjjj wrote: »

If you have a fixed term contract of say 3 months or 6 months, I'm not sure how the HMRC could class that as PAYE?
Although I suppose it's risk as you say...as the employee probably doesn't provide their own equipment, etc.

Secondly, if you set up a LTD company, how quickly can it be wound down?
Presumably there are regular monthly accountant fees to pay?

Why would you think that a 3-6 month contract would suggest self employment rather than PAYE? The default for any worker is PAYE unless you can prove that the self employment rules apply. Casual/temporary workers are probably more likely to be regarded as PAYE - it's not contract length that determines - it's a whole host of factors, primarily risk V reward, own equipment V employers equipment, degree of control, mutuality of obligation, substitution rights, etc.

As for accountancy fees, that's something you have to ask the accountants who you approach for quotes etc. Every firm is different and will have their own way of billing etc. Some will charge monthly and apply a minimum number of months, others will charge hourly and bill say quarterly, others may have a monthly fee but may charge a surcharge if you've not been paying for a full year. You'd be best to ask the accountants specifically what their fees would be if you only wanted the company for a few months - far better to know with certainty rather than pontification on a forum.

ZoeSmart

Hi janeskejacobs,

I work for a company called Danbro, we specialise in payroll services for contract and freelancers. If you require some more information about your query below you can call one of our business consultants on 0800 731 3178 and they will be able to give you more information on how much we charge and how much more you will be able to take home.

We will also be happy to offer you a weeks free trial under our umbrella company

Kind Regards,

Zoe Smart