Pay via Ltd Company, Umbrella Company or direct PAYE advice

taper

Hi,
My OH has just been offered a contract role for 12 months and has been asked if he wants to work via

1: A Ltd company (he does already have a Ltd company set up from when he was previously self employed). The rate to the business would be £33.50 per hour.
2: an umbrella company, where the umbrella company become his employer and are responsible for making the necessary tax and NI deductions.
3: Direct PAYE where his rate would be lower at £28.50 per hour.

He is also entitled to a small daily allowance on top of the hourly rate.

We have no idea of the pro’s and cons of these options and what would be financially better.

any advice would be much appreciated.

Thanks in advance 

Peter999_2

Will his role be inside or outside of IR35?

DullGreyGuy

Peter999_2 said:

Will his role be inside or outside of IR35?

They're offering LTD and so almost certainly so... you can operate an inside role with a LTD in theory but in practice not seen anyone offer that option and accounting is a bit odd.

If he's had a Ltd company before he presumably has already looked into and understands what tax efficiencies are available given your situation etc.

p00hsticks

DullGreyGuy said:

Peter999_2 said:

Will his role be inside or outside of IR35?

They're offering LTD and so almost certainly so... you can operate an inside role with a LTD in theory but in practice not seen anyone offer that option and accounting is a bit odd.

Would the fact that the company also appears to be offering the option of taking the role as a PAYE employee influence whether the work falls inside or outside IR35 ?

DE_612183

try Contrctoruk website - they have a number of take-home calculators based on different models

Grumpy_chap

taper said:

Hi,
My OH has just been offered a contract role for 12 months and has been asked if he wants to work via

1: A Ltd company (he does already have a Ltd company set up from when he was previously self employed). The rate to the business would be £33.50 per hour.
2: an umbrella company, where the umbrella company become his employer and are responsible for making the necessary tax and NI deductions.
3: Direct PAYE where his rate would be lower at £28.50 per hour.

He is also entitled to a small daily allowance on top of the hourly rate.

We have no idea of the pro’s and cons of these options and what would be financially better.

any advice would be much appreciated.

Thanks in advance 

For those options to be given, I assume the role has been assessed as "outside IR35".

With an established Ltd Co, and the knowledge of how that operates, that would seem to be the obvious route.

Is the rate  via Umbrella Co the same as Ltd Co?  Working via UC, there are few opportunities to minimise tax other than SS pension where available.

The third option is essentially the Ltd Co rate less employer's NI / apprentice levy / pension auto-enrol etc.

This may be a situation where the Client's expectation is that the role will be via Ltd Co., but the alternatives are offered as a convenience if preferred by the individual.

taper

Thanks for your replies so far.  The role is inside IR35.

DullGreyGuy

p00hsticks said:

DullGreyGuy said:

Peter999_2 said:

Will his role be inside or outside of IR35?

They're offering LTD and so almost certainly so... you can operate an inside role with a LTD in theory but in practice not seen anyone offer that option and accounting is a bit odd.

Would the fact that the company also appears to be offering the option of taking the role as a PAYE employee influence whether the work falls inside or outside IR35 ?

Its not one of the questions asked on CEST or any of the third party tools and I'd argue it shouldnt make a difference... I could hire an employee to run a project or I could pay PWC etc to run it for me... all you are doing is subbing in a smaller consultancy for PWC.

taper said:

Thanks for your replies so far.  The role is inside IR35.

And they are offering the option of going via your LTD?  I'd speak to your accountant because that is unusual, it is doable but not many will know the details of how you have to account for everything. Certainly my accountant stated it'd still be the best option but clearly significantly less beneficial than if it was an Outside role 

Grumpy_chap

taper said:

Thanks for your replies so far.  The role is inside IR35.

I'm surprised they have offered to go through your own Ltd Co.

How large is the Client?  There are slightly different rules for small companies that make that easier (remains the Consultant's assessment of in or out).

It would seem as though Umbrella Co is the most likely outcome but, as @DullGreyGuy said, run through with your Accountant first - if you can still go through own Ltd Co, that will still be favourable.  Check also whether the Client will withhold any tax from the gross payment in this route.

NannaH

My husband has just finished a temp contract and went with Umbrella.  He ended up with around £25 (from £35) an hour after tax/ double NI/ umbrella fees. 

I say around £25 because he was never paid the same amount twice!  

Huynha

NannaH said:

My husband has just finished a temp contract and went with Umbrella.  He ended up with around £25 (from £35) an hour after tax/ double NI/ umbrella fees. 

I say around £25 because he was never paid the same amount twice!  

Thats interesting