unbrella co's / deductions help please!

brightonman123

Had an offer of a temp job!

Done via company 'A, though they say a partner company 'B' will be arranging pay etc... I am rather confused on several points*

They say I will be an employee of 'firm B', but its sounds more like a contractor setup - charging me for privilege of doing their books?

* mainly their admin fee - £xx a week (circa £1,500 a year) - Is this normal?
Also, the employers N.I. will also be taken off my pay (after admin fee deducted) along with the normal income tax / employee's N.I. ?

- Supposedly a few quid better off versus PAYE, but surely employers' N.I. is THEIR liability, not mine? some additional shopping discounts offers mentioned are free, but didnt go that far..

They said I get travel costs covered, but have to claim that back via a tax rebate- not repaid direct?

+ food allowance- if away from home for more than 10 hours a day (this is most likely, including the work time, and travel to/from office) - seems thats paid weeky, receipts needed for any audit.

brightonman123

re the fees, any idea how this would compare to doing this via my own ltd co? any other costs likely? company setup / accounting fees, business taxes, insurance?

I have spoken to the recruitment agency A, who say the hourly rate that we agreed can be paid normally via PAYE, though co. B gets an enhanced rate to work on? about £1.30/hour extra.

tres confused!

brightonman123

bump for help!

Are these brolly co's legit? Will i face any extra tax bill, at year end?

any other charges due?

Seems just an income generation ploy, off the back of my work!

RobTang

It is a contractor setup, with the umbrella acting as your admin.
Although some umbrella companies offer more services to you than others.

While they used to be mainly for booking keeping on your side, mainly these days they are to keep you outside of IR35, which is the main reason not to setup a LTD these days.

Yes they are charging you for doing their books but as a contractor the client company should be paying you a more to do that overhead.

Pennywise

Even if IR35 would apply to your working arrangements, you'd still probably be better of using your own limited company. Accountancy fees for the full service would be less than £1500 from most accountants. If you register for VAT and adopt the flat rate scheme, you could make a few hundred pounds extra profit from that, if not a thousand or two. There are no expenses that you could claim through an umbrella that you couldn't claim through your own limited company.

The main thing you have to consider is how long you're going to be contracting. If it's 6 months or less, I'd say it wouldn't be worth the cost and hassle of setting up your own Ltd, then winding it down again so quickly. If you're in it for the longer term, then Ltd co is the way to go, IR35 or not.

Just make sure you get a decent accountant. There are a few of the larger contractor specialists who offer really poor service, yet others who are really good. Ignore the hype on their websites and talk to a few. There are also plenty of smaller online firms who can perfectly well deal with freelancers. I'd say to avoid the typical High Street local practice who, in my experience, tend to deal with more traditional bricks & mortar businesses and don't really know all the ins and outs of dealing with freelancers/contractors.`

brightonman123

Thanks for all that. Just seems an odd / complicated way of doing things.. If on PAYE, the main agency would have to do admin anyway!

Pennywise

brightonman123 wrote: »

Thanks for all that. Just seems an odd / complicated way of doing things.. If on PAYE, the main agency would have to do admin anyway!

It's all down to the employment protection legislation. If a company takes you on directly, they aren't just liable for dealing with the PAYE/Admin, they also have all the other liabilities, maybe including redundancy, pensions, unfair dismissal, unions, etc. That's manageable for long term/permanent positions, but can become a minefield for short term/temporary positions, particularly, where the role lasts longer than planned - the firm suddenly finds itself with a "perm" entitled to full employee protection when it never intended that in the first place.

So, they need to place some distance between themselves and their temps, and agencies are the answer. Sadly, an unintended consequence of the employment protection legislation - like so many things, sounded good in theory, but a nightmare in practice because those drafting the laws don't have practical experience of reality.

LittleVoice

Pennywise wrote: »

It's all down to the employment protection legislation. If a company takes you on directly, they aren't just liable for dealing with the PAYE/Admin, they also have all the other liabilities, maybe including redundancy, pensions, unfair dismissal, unions, etc. That's manageable for long term/permanent positions, but can become a minefield for short term/temporary positions, particularly, where the role lasts longer than planned - the firm suddenly finds itself with a "perm" entitled to full employee protection when it never intended that in the first place.

So, they need to place some distance between themselves and their temps, and agencies are the answer. Sadly, an unintended consequence of the employment protection legislation - like so many things, sounded good in theory, but a nightmare in practice because those drafting the laws don't have practical experience of reality.

I don't think the OP was writing about being an employee but of being paid via PAYE through the agency. Agency temps can be paid via PAYE without being employees of an agency: they are working under a contract for services not a contract of service. (Some agency temps are employees of the agency but not all of them are.)