Umbrella Companies

anyusernameleft

I am self employed but work can be intermittent, especially running up to Christmas.

I have been offered work with a really nice company but through a recruiting company. The recruiting conpany insist I use an Umbrella Company to be paid.
This involves my paying £35 a week to the umbrella company who then deduct emplyers NI as well as emplyees NI and do so other weird things that I worry will bring HMRC down on me but I have no choice if I want the work.
I feel I am working for the rcruiting company and the umbrella company with little to show for it myself.

I did two days last week before realising what I was getting into as the contract did not come through into my online account with the Umbrella comoany until after I had started work and there was no time to read it. I now can't find the contract on my online account but I will try again when I get to a computer.

The recruiting firm say they have to do it this way because HMRC now insist upon it.
Is this true?
The work is nice, I need the money, but I feel that both myself and the compnany I'm actually doing the job for are getting badly ripped off here and I dont want trouble later with the revenue.

If I do have to use an Umbrella company does anyone know a good one?

anyusernameleft

I've found an explanation here of what is happening, does anyone have any advice?
http://www.ucatt.org.uk/workers-caught-umbrella-tax-scam-paid-wayne-rooney

getmore4less

You need a rate of at least 25% over the standard PAYE rates to cover holiday and employers NI if going ummbrlla,

£35 weekly margin seems a bit high.

patman99

The HMRC don't insist on it. In fact, they hate Umbrella companies as they actively help their client (the Agency) avoid Tax.

Better to set yourself up as a Limited company and bill the Agency direct.
You can still pay yourself part of your wages as expenses (ie £5 per day for food), but without it costing you £35 per week for the priviledge.

If the Agency refuses, then walk away and go work for another Agency.

anyusernameleft

There aren't that many agencies and they are all starting to pull the same stunt.

I've just finally managed to find my contract with the Umbrella company.
It's a zero hours contract with a months notice and I'm not allowed to work for anyone else. None of this was explained to me verbally when I signed up.

I'm not interested in billing for tax relief for food, that has never been permissible as a self employed person and I'm not doing it through the Umbrella Company because it's just wrong.
I AM interested in getting tax relief on my necessary tools of the trade which I have to buy, supply and maintain.

It's really just not worth trying to work at all these days but I need the money. I'm losing the will to live.

anyusernameleft

No matter what Umbrella companies tell you, you are signing up for a zero hours contract. You can't work for anyone else, you have to give a months notice and you are paying the employers NI contribution as well as the employees NI contribution and £35 a week payment to the Umbrella company.
You can't claim for tools and equipment unless you want the Umbrella company to own them, and you may well end up in trouble with HMRC over the way they pay you minimum wage and then say the rest of your fee is "commission".

Stop this insanity now and lets all just go back to Sole Trader or PAYE.

makeyourdaddyproud

patman99 wrote: »

The HMRC don't insist on it. In fact, they hate Umbrella companies as they actively help their client (the Agency) avoid Tax.

Better to set yourself up as a Limited company and bill the Agency direct.
You can still pay yourself part of your wages as expenses (ie £5 per day for food), but without it costing you £35 per week for the priviledge.

If the Agency refuses, then walk away and go work for another Agency.

A LTD co is only any good if there is guaranteed work. This might be the only appointment for some time, and with that responsibility comes annual filings, accountants etc.

An umbrella is still good value, though I woudn't say £35 was a privilege, as they still have to abide by the terms of tax law. So long as the umbrella is not breaking any rules, it's fair game.

HMRC are only complaining because umbrellas have better accountants and lawyers a newbie wet-behind-the-ears LTD co could afford.

patman99

That clause in the zero hours contract about not being able to work for anyone else is, of course, now illegal. They can no longer enforce it.

I have worked for many agencies and only one insisted on paying via an umbrella company.

InsideInsurance

Umbrellas are a bit of an odd beast, in a number of ways.

HMRC certainly dont insist on them but if the client doesnt want you as an employee then there are significant risks to them taking you on as a self employed/ sole trader as HMRC may decide you are a concealed employee despite what your contract says and charge them employers NI etc.

As most companies dont want to run these risks then will insist that the contractors either go via an umbrella or their own Ltd. The umbrella is your employer and so the risk to the client disappears. The difference between your day rate and what you get back from the umbrella is normal. My current client has been paying KPMG nearly £2k a day for some senior actuary guys but you can bet your bottom dollar that KPMG are not paying them anything close to that.

Umbrellas -v- tax law? I think it varies massively. There are many that are very normal in operation and the only ropey bits can be the £10/day for subsistence without evidence etc. There are some that go to extremes to mitigate your tax liability, there is the one that gives you 90% of your day rate as a loan but you and all the other contractors are the trustees of the loan (ie itll never be repaid)