Umbrella's who offer "invoice only" services

[mrraillondon]

Hi everyone,

Strictly speaking I'm not an IT contractor but involved in the railway sector.

A lot of the guys I know use Umbrella's and many have been advised by their "agencies" (i.e. the guys they do work for who they should be employed by) to use invoice only umbrellas - where all the Umbrella does is send an invoice to the agency on behalf of the guy, recieves the money and then just pays the guy minus thier fee - no PAYE etc.

Can anyone explain to me the benefits of doing this as opposed to going down the full PAYE umbrella route?

It doesn't make sense as you will still have to a tax return anyway. So, either this services offers a very cheap end of year service or the guys who do this just don't even bother submitting tax returns!

Basically, how on earth does this setup even work?

Many thanks for any help.

[Wanderer]

Basically, how on earth does this setup even work?

Sounds like you would be self-employed and declare the income on your self assessment. Most of us can't operate as self-employed because our client's won't allow it, if a self-employed person doesn't pay their tax then I think the client could become liable for it. I don't know what the situation would be if the umbrella paid you as self employed.

I guess there is a tax advantage to being self employed over working through an umbrella in that if you go through an umbrella then you will have to pay employer's NI as well as employee's NI. With self employed you may avoid the employer's NI.

Can you give us some names of these "invoice only" umbrellas? Don't go dealing with any outfit that talks about "schemes", is based off shore, takes a percentage (rather than a fixed fee), uses foreign currencies or that operate a complex system and they can't clearly explain how they work. These are widely regarded as risky and you may be lumped with a big tax bill going back up to 6 years...

[mrraillondon]

Sounds like you would be self-employed and declare the income on your self assessment. Most of us can't operate as self-employed because our client's won't allow it, if a self-employed person doesn't pay their tax then I think the client could become liable for it. I don't know what the situation would be if the umbrella paid you as self employed.

I guess there is a tax advantage to being self employed over working through an umbrella in that if you go through an umbrella then you will have to pay employer's NI as well as employee's NI. With self employed you may avoid the employer's NI.

Can you give us some names of these "invoice only" umbrellas? Don't go dealing with any outfit that talks about "schemes", is based off shore, takes a percentage (rather than a fixed fee), uses foreign currencies or that operate a complex system and they can't clearly explain how they work. These are widely regarded as risky and you may be lumped with a big tax bill going back up to 6 years...

The one I've been recommended to use is futurelink. I think it's reputable but my only issues are:

1. The guys who go down this route should really be employed by thier "agency" and should therefore be full PAYE umbrella.
2. Even where there is a genuine case for self-employment - why waste you money to these companies for basic admin duties? Surely you can be bothered to draft an invoice and tell your "agency" what bank to pay. Then, at the end of the tax year, get an accountant.

Re: The client becoming liable to unpaid tax - surely not!? I'd assume this is only the case with clear cut IR35 cases?

[LisaContractorUmbrella]

Can't see the point of this at all tbh; you are paying a fee to someone to do pretty much nothing And yes there is the possibility of debt transfer with sole traders - nothing to do with IR35 though as far as I know

[mrraillondon]

Can't see the point of this at all tbh; you are paying a fee to someone to do pretty much nothing And yes there is the possibility of debt transfer with sole traders - nothing to do with IR35 though as far as I know

My sentiments exactly Lisa - I've had it described to me as "money for old rope".

[Alan @ BroomeAffinity]

I had a client use them in the past. I couldn't fathom the point of it either. Although he did mention that colleagues said the benefit was that the money is received gross into your personal bank account at which stage you can "do what you want with it" which I took to mean not declare it for tax.

[LisaContractorUmbrella]

I had a client use them in the past. I couldn't fathom the point of it either. Although he did mention that colleagues said the benefit was that the money is received gross into your personal bank account at which stage you can "do what you want with it" which I took to mean not declare it for tax.

Did these people play Russian roulette as a hobby as well??