Setting-Up a Ltd Co

[Zeppelin]

Hi

I'm a first-time contractor still getting to grips with various aspects of contracting (although The Contractors Handbook is very useful!). Although I'm fairly clear that generally speaking, forming a Ltd Co would be more financially advantageous than working through an Umbrella Company, I'm baffled with the range of companies and options that seem to be available offering accounting services whilst delivering 85 or even 90% of the daily rate as net pay. I've contacted a company called Smart Pay and they seem highly credible, guaranteeing 85% through an apparently valid and HMRC approved financial mechanism. Does anyone of the forum have experience of Smart Pay please and would you recommend them?

In the meantime, I'm contratcing through an umbrella company which, while they seem very efficient, I'm only attaining around 67% of the daily rate, apparently as I already pay income tax through a pension from a previous employment. This seems very low to me even as an umbrella company although I'm not at all clear on this.

Very grateful for any input please!!

Thanks.

[administrator]

Hi Zeppelin,

85-90% returns are very risky:
HMRC Scheme Enquiries
Time's almost up for 16,000 tax scheme contractors :: Contractor UK

Have a read through that before you enter into a relationship with a scheme. They will tell you it is safe and approved in the same way a secondhand car salesman will tell you the knocking noise you hear when you drive the car is nothing to worry about. It's you HRMC will come after, not them.

Most cost effective way to contract, if outside of IR35, is Ltd Co. If you are inside IR35 or don't want the hassle of running a ltd co then working through an umbrella company is fine.

[Clare@InTouch]

As above - be very, very wary of anyone offering such high returns. If it sounds too good to be true then it usually is. Have a mooch around the Accounting forum to see experiences other people have had - starting with the Montpelier/BN66 threads.

An umbrella company is simple and easy, so great if you're only contracting for a little while.

If you're contracting for a year or more, and earning at least £30,000, then Limited will be more tax efficient even if you're inside of IR35. A decent accountant should still make the process easy, so call a few and see who you get on with. I'd suggest that the relationship you have with them could be more important then their fee too, as you have to know you can trust their advice and that you can use their systems happily. It's no good saving £25 a month only to find out later that you didn't get advice that could have saved you thousands in tax.

[LisaContractorUmbrella]

If you find a scheme and the operators say that it is not tax avoidance and is HMRC approved - ask them for the letter from HMRC confirming it - if they can't produce it contact HMRC themselves and ask them whether or not they do in fact approve the scheme and then ask them to put it in writing. If you manage to secure either I will give you £1000

p.s. A limited company will net you a higher return than an umbrella company BUT only if your working practices put you outside of IR35

[Waldorf]

If you listen to just one piece of advice on this forum, it is to AVOID these schemes at all costs, do not be tempted by fools gold or any other "promise" that these operators may offer you.

Go limited, I use Nixon Williams and their guide is quite good at pointing you in the right direction,
http://www.nixonwilliams.com/images/...ny%20Guide.pdf

[Zeppelin]

Setting-Up a Ltd Co

Thanks very much everyone and much appreciated. I'm convinced! I received documentation from Nixon Williams shortly after Smart Pay sent their initial documentation but ignored it as I'd been too quick to believe the former.

Thanks again