Yet another self employed vs ltd vs umbrella post

bhompy

I sincerely apologise for yet another post on this topic but the more I try to read and demystify, the more I am getting confused... hence would just appreciate some comments please

I’ve always been employed by a company (accountancy firm – in practice). Following time off (sick from Sept-Dec) I am now intending to return to work but taking on temporary finance roles (industry) via recruitment agency - to ease me back in to work; and also get a flavour for industry – or else head back to practice.

I have enjoyed the practice situation and varied client work – however the last practice was not suitable (too much favouritism, old boys club, too much unpaid overtime compared to other firms and generally led to lot of mental stress and sickness). I wouldn’t mind going to a smaller firm if I were to continue in practice to maintain sanity – although by the time I finish the temporary role I will have been out of practice for nearly a year.

This question may have been repeatedly asked but I actually don’t know any better so would be very grateful if anyone could help.

I am very confused in whether I should adopt
a) Self employed contractor status and then just add the day rate received and fill out personal tax return as required – although not sure what the situation with self employed NI would be. Does this replace EE NI?
b) Ltd company. I think I will be okay handling the admin and filings.
c) Umbrella company operated by the recruitment agency.
I have no intention to evade or avoid taxes that I would pay as employed person – although obviously not pay extra either as with limited / umbrella company I believe I need to pay ER and EE NI; plus cut for the recruitment agency for umbrella company run by them.

My dilemma arises as I am not sure which I should go for and where IR35 applies.

Under which can I deduct the following before arriving to taxable income:
- Cost of laptop and software
- Phone costs
- Printing, postage, stationery
- Professional training course to help with the job
- Professional subscription (think I can deduct this anyway on my personal tax return thus far – this used to be paid by employer but I will be paying it personally now)
- Travel to the temp job which I believe would be wholly, necessarily and exclusively for that job (I have never claimed deduction for the normal commute in the employed situation)
- Life insurance
- PI insurance

I have also picked up a freelance writing job where I get paid per piece – and its up to me to sort the taxes.

I also intend to start baking/cake decorating for events. Are the additional course and tools tax deductible?

Can I form 1 limited company and bunch all three streams in the one company? And then perhaps extract profits as salary (although again end up paying ER and EE NI which I don’t want to).

Also, on the limited company - does the director info (name, DOB, address, nationality) just live on forever on CoHse public domain even after resignation and/or dissolving the company? I am aware I can use a separate registered address for the company and not use the residential address.

Any help would be really appreciated. Thank you!

bhompy

I am researching all the above including the contractor forum, and qdos, but any thoughts on some of the queries above would be very welcome. Thanks!

System

I'm a finance contractor. I'm on my second contract which is coming to an end in March. A Ltd company would allow you to deduct all of the above although research the life insurance products as there are specific HMRC approved insurance products. Travel can only be deducted for 24 months max (although ideally in finance your contracts shouldn't be anywhere near that length).

Regarding IR35, if you go through a recognised recruitment firm then usually the contracts are written in a way that will make it ok from a tax point of view. Otherwise your accountant can review the contracts for you.

Pennywise

Will your customer be willing to pay you as self employed sole trader? Most firms won't and insist their freelancers/contractors are engaged via an umbrella or limited company, so your first port of call would be to check with your client what options they will give you.

Out of your list, life insurance isn't allowable in any scenario. Most of those costs won't be allowable under the umbrella or if you're caught by IR35. You may not even need PI insurance - that is another matter for your client to dictate.

To find out whether IR35 is likely to apply or not, I'd suggest you get a contract/working practice review by a specialist, not a general accountancy firm. Specialists cost about the same anyway, so why wouldn't you? I'd suggest you consider QDOS, Accountax and Bouer & Cottrell - all highly respected in the industry.

System

Death in service products are allowable and can be used with no B.I.K. implications so can be used instead of life insurance.

paddedjohn

Umbrella schemes are to be banned soon, apparently.

System

Not really sure how or why the umbrella company set up would be banned. The employee is paying PAYE plus eemployers NI so all above board.

motorguy

paddedjohn wrote: »

Umbrella schemes are to be banned soon, apparently.

No they're not. Theres schemes designed to get you 90% of your day rate and those are to be banned (or should be) but a standard umbrella company arrangement is fine and commonplace.

motorguy

Walcott wrote: »

Not really sure how or why the umbrella company set up would be banned. The employee is paying PAYE plus eemployers NI so all above board.

They're not. Hes wrong.