Contracting and Umbrella Companies

danw_2

Hello there,

Not sure if anyone can help me out, as I am not as clued up as I should be on the following issues/recent rulings on IR35 compliancy...

Basically I have been working as a contractor within the Engineering industry for almost 5 years and have been employed by a Composite/Umbrella Company called Brookson Engineering. They claim to be the best guys to go to to reduce the tax you pay. I have been only paying about 20% (ie they pay you divedends from a company set up by them) for the past five years which I thought was fantastic. They take around £25 per week in fees, and initially I thought that was OK and fair.

However, the recent rulings by Gordon Brown has forced Brookson to re-assess their method for reducing tax. Instead of paying dividends they now propose to make each indiviual contractor a director of a seperate company. In a recent letter to me they banged on about how great this was for me as I will be receiving an extra £70 per week!!! They even did an illustration to show me how much better I am off than before per year, which is over £3000!!

My question is, if I am so much better off this way, then why hasnt it been done like this for the last five years? Have Brookson been pocketing this £3000 per year for themselves? I feel a bit duped and annoyed, because if I had of known this from the start I would have become a director of my own company!!!

Anyways, I apologise if I am missing an obvious point here- but anyone who can explain this to me would be much appreciated. Is there a way I can claim back this lost money? I doubt it, but feel I have been unfairly tricked by Brookson.

Dan

Petmidget

In short umbrella companies or Managed Service Companies are they are technically known are over, loophole closed.

Most MSC's are splitting to use Personal Service Companies, which most contractors in a lot of industries already use.

Now depending on the fees involved you might be as well not sticking with your umbrella provider.

As a comparison a fairly average accountant wodl charge £500 - £800 for a PSC. You would still be paid dividends in the main.

Though as an aside, PSC are pretty near the top of the hitlist, with Chartered Institute of Taxation in a recent public consultation recommending if treasury want to tackle the "problem" they should come up with a way of puting NI on dividends of small companies. I wouldnt expect the status quo to last mroe than another 5 years.

Petmidget

Ps, as to how Brookson have been treating you previously that wold very much depend on the exact circumstances, my opinion as always been they are a rip off.

Why charge a % of income when regardless of income level the work is pretty much the same form 1 contractor to the next

everso908

yeah plsu im always worried there dodgy.
even when you get the cis vouchers, im not sure if they payed th etax or what
not to sure of the changes in april but i know there scrapping the pay 3 percent and dont pay tax thign they do

danw_2

Thanks guys,

That was useful. Yes I do have the feeling I have been getting ripped off over the past five years... Not sure if I can do anything about it though... Does anyone on here know if I have grounds to claim some money back?

Dan

Petmidget

If I am honest I doubt it very much, you have just been duped into paying over the odds for a service, they havent done anything wrong you just didnt find the most competitive deal.

Have a go a PSC yourself, its not that complicated and if you struggle ask a local accountant.

david13

Try these websites:

http://www.itcontractor.com/
http://www.pcg.org.uk/

They don't just cover IT, but engineering too.