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  1. #1

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    Default Forced to use umbrella??

    Hello,

    I have worked via my own ltd company in the private sector for the past few years. Am now looking into my first public sector contract and have been told that the client requires contractors to use an umbrella company, not ltd.

    The recruitmemt team have put me in touch with their partnered umbrella firm but have said its my choice.

    My question is, can a client really force me to only use an umbrella company? If so, i might have to rethink given the impact.

    Thanks!!

  2. #2

    Some things in Moderation

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    Hi,

    I have moved you from the Umbrella sub-forum to the Public Sector IR35 sub-forum as this is the correct forum for your post, and I'm not sure if you're aware of the HMRC tax changes happening in the public sector.

    Quote Originally Posted by TheFaQQer View Post
    What's this all about then?

    In the 2016 Autumn Statement, the Chancellor confirmed that from the start of the following tax year (from April 6th 2017), the status of contractors / freelancers in the public sector would be assessed by the public sector body (PSB) engaging them either directly or via an agency. Where the PSB determines that the contractor is inside IR35, the fee payer (the company closest to the contractor company) will be responsible for deducting PAYE and National Insurance as if the contractor was an employee. This applies to all payments received after April 6 2017, regardless of when the work was done or even if you are in contract any more.

    The decision to bring the changes in was done so despite significant opposition from many places (I personally sat with HMRC and explained why this was "a very bad thing", and know many others that did too). However, HMG ignored the voices from many quarters and brought forth the rules anyway. So what does this mean for contractors in the public sector?

    In Summary

    For contractors working in the public sector
    • Their IR35 status will be determined by the client
    • If you are determined to be inside IR35 then all payments received by your company will be made after PAYE and NI have been deducted
    • Travel and subsistence expenses will no longer be allowed
    • The normal 5% allowance for expenses does not apply to public sector engagements
    • Even though you will be taxed as an employee, you will not gain the rights an employee is entitled to

    Please note, this is my own personal view on the changes to how IR35 is determined in the public sector. I have drawn heavily from published sources, notably the IPSE Guide to IR35 in the Public Sector (2017) which can be downloaded from their website
    have a read of this post: Working in the Public Sector? An FAQ about IR35

    Do your research here and you'll have more information to work with.

  3. #3

    More time posting than coding

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    Default

    Unfortunately we hear this way too often, the agency may not feel too comfortable with you using a company of your own choosing, however we have been successful with some agencies in getting them to allow the contractor to use us by submitting all of our corporate documents and undergoing a compliance questionnaire, so it may be worth a go!
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    More time posting than coding


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    Default

    I would like to find more information about this too, read up the forum links provided above but they are a mess.

    Simple questions would be can you:

    Use your Ltd as an Umbrella and change your Salary to represent the daily rate so that your Ltd company pays for all Taxes and NIC. You do that already anyhow, salary would just be much higher and no dividends. You have an accountant, you have payroll company... so what's the problem.

    You won't get travel allowances and expenses... this means contracts should be local to home only.
    Might be worth asking someone about the Self Assessment part where you can put down travel expense for temporary work places and it gets deducted from your overall income so no TAX to pay on that.


    Sounds to me like the recruitment companies are forcing us to go via a Umbrella company (most likely an affiliate to theirs)


    I wonder if I open my own Ltd company in Ireland or in EU how would that affect me, no need for Umbrella then. Guess it depends on Brexit:P
    Last edited by Drei; 24th July 2017 at 13:48.

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    Some things in Moderation

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    Quote Originally Posted by Drei View Post
    I would like to find more information about this too, read up the forum links provided above but they are a mess.

    Simple questions would be can you:

    Use your Ltd as an Umbrella and change your Salary to represent the daily rate so that your Ltd company pays for all Taxes and NIC. You do that already anyhow, salary would just be much higher and no dividends. You have an accountant, you have payroll company... so what's the problem.

    You won't get travel allowances and expenses... this means contracts should be local to home only.
    Might be worth asking someone about the Self Assessment part where you can put down travel expense for temporary work places and it gets deducted from your overall income so no TAX to pay on that.


    Sounds to me like the recruitment companies are forcing us to go via a Umbrella company (most likely an affiliate to theirs)


    I wonder if I open my own Ltd company in Ireland or in EU how would that affect me, no need for Umbrella then. Guess it depends on Brexit:P
    This is incorrect.

    You cannot get expenses on contracts that are inside IR35.

    You can only use an umbrella or PAYE through an agency or using your own UK Ltd company - often umbrellas are the only way some agencies will let you work as they are not set up to run PAYE and they don't trust contractors to pay the full amount of tax using their own Ltd company. And the agency is allowed to do this - they are responsible for you paying the correct amount of tax.

    So using an Irish Ltd is a complete non-starter.

    Oh, and this has NOTHING to do with Brexit.

    (But I have fixed the links.)

  6. #6

    Still gathering requirements...


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    Default

    Quote Originally Posted by Drei View Post
    Use your Ltd as an Umbrella and change your Salary to represent the daily rate so that your Ltd company pays for all Taxes and NIC. You do that already anyhow, salary would just be much higher and no dividends. You have an accountant, you have payroll company... so what's the problem.
    You have always been able to treat contracts as inside IR35 through your limited company and treat all fees received as salary paying full tax and NI. Unfortunately in the public sector the (ill thought out) IR35 rules introduced in April say that even if you promise in blood to do that, HMRC won't believe it and will insist on the client or your agency (if there is one involved) has to account for your tax and NI instead. Agencies in particular did not want this as they would have all of the hassle of running you through payroll just like an umbrella but they got no fees for doing so, and so instead took the easier route of just forcing you to go umbrella.

    Reason you cannot just say that your limited company is now an umbrella company is that the rules say you can't have more than a 5% shareholding.

    There is no reason for an agency to force you to use a specific umbrella as (apart from ones involved in tax avoidance schemes) they are all broadly equal in the way they work out your take home. The main differences are in how professional they are and how easy they are to work with. However, often agencies have commission arrangements with an umbrella company and get a small introduction fee if you use them.

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    More time posting than coding

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    Quote Originally Posted by mike67 View Post
    There is no reason for an agency to force you to use a specific umbrella as (apart from ones involved in tax avoidance schemes) they are all broadly equal in the way they work out your take home.
    Not broadly equal, they should be the same give or take a few pounds at most, the only difference you should ever see is the margin they charge, and their service levels.
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    I've just had an approach from an agency for an inside role - they had a requirement to use one of 3 umbrellas of their choice - parasol and giant were two of them. I didn't proceed further as I had applied via another agency. I came across a thread with a negative view of parasol (rightly or wrongly).

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    My post count is Majestic

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    Quote Originally Posted by mike67 View Post
    There is no reason for an agency to force you to use a specific umbrella
    However, often agencies have commission arrangements with an umbrella company and get a small introduction fee if you use them.
    But isn't that a reason?
    'CUK forum personality of 2011' - Winner - Yes really!!!!

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    Quote Originally Posted by northernladuk View Post
    But isn't that a reason?
    Get your drift. I meant that any agency should be able to work with any decent umbrella company if you insist - there is nothing magical about their preferred ones. The reason they don't is either laziness as they don't want the hassle of working with several of them (although they are happy to work with any number of PSCs!) or because they get commission for using a specific one.

    A decent agency should offer to introduce you to their preferred umbrella company (to get their commission) but if you want to work with any other one they should accommodate (as long as they are not operating a dodgy tax scam scheme).

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