start with umbrella then switch to ltd?

[calacik]

Hi

i have started browsing and in search of first contract,in the meanwhile I don't have my own ltd registered with companieshouse yet,

would it be possible join an umbrella company for start and then maybe 1 or 2 month down the line
switch to my own ltd once all setup ?

can anyone recommend a good umbrella company that doesn't charge penalty for switching at later stage?

also what are check list for before signing a contract and first week of the contract ?

this is going to be my first contract and I am nervous due to lack of understanding full process which i be going thru
,my understanding is that if I go via umbrella company all i be required too is fill in a time sheet once a week and send/fax to them.

where as if i go via my own ltd I be required to
1. take out insurance to cover myself on clients site
2. sign up with an accountant
3. fill in time sheet and sent to the accountant on weekly basis?

is that all about it ? is it accountant that provides me with copy of blank timesheet to fill in ?

anything else i need to know and mention while at interview or signing the contract ?

I also understand the cost saving benefits of having my own ltd, but confused about IR35 I suppose my accountant will take care of that for me ?

if someone can share full list of events and steps I should go thru from the moment i have been offered a contract and end of first week that be usefull.

thanks

[Maslins]

Your suggestion sounds like a good idea. Umbrella makes it easier to dip in to the contracting world.

Many people set up a company on day 1, change their mind 3 months in, then throw toys out of the pram about all the hassle of closing the company.

If you're new to contracting and unsure, go umbrella then consider changing to Ltd 6-12 months down the line...and if anything I should be biased towards people using companies.

[sunflower]

You can check out this website for the first timers guide.
First Timers Guide - for IT Contractors :: Contractor UK

Some agents will let you use an umbrella first and then switch to a limited. Other agents will try to force you to use their favourite payroll company (not legal actually, as long as you comply with tax, etc that's the main thing).

You are about to enter the jungle of agents placing dummy adverts to fish for your cv and references for their business development.

They can really mess you around - eg make appointments for an initial phone interview with a client and then the client or agent never calls again.

Make sure you know what the market value is for your skill. Agents may try to push your rate down and it's worse if they know you are new to the contracting world.

You can look a payroll options from say SJD Accounting. 85 a month. They have overviews and calculators on the website and it shows you the difference between a limited and self-employed scenarios. I don't know about pentalites for switching to a limited or other solution, but some umbrellas have a notice period. It can be just a couple of days. Check out some umbrella cos and ask them.

LisaContractorUmbrella on the forum has lots of posts on umbrella related topics.

Generally, if you are not going to bring in 25K in a tax year, don't go for a limited becuase of the added accounting costs.

Timesheets can sometimes be sent once a month or once a fortnight. It depends on the umbrella. Some pay every 2 weeks (may charge more for it), some pay per month.


.. check list, what happens if your end client does not pay the umbrella co or goes bust? Insurance?
Does your umbrella have liability insurance?
Don't use umbrellas with dodgy offshore schemes. Will not be compliant and you will get tax bills.

Some accountants like quarterly account sheets - they won't ask for timesheets, but use your invoices.

Read up on IR35 but that's more relevant if you have a limited one day. Not all accountants are IR35 experts and it's not their role. There are suggestions on this forum for experts who check your contract over for IR35 friendliness or unfriendliness. All your accountant needs to know at the end of the day is does your contract fall into IR35 or is it outside it.


If you are going to contract abroad, not all countries will allow you to use a UK limited in any case. You may have to go on a local payroll there.

Good luck

[SueEllen]

Hi

i have started browsing and in search of first contract,in the meanwhile I don't have my own ltd registered with companieshouse yet,

would it be possible join an umbrella company for start and then maybe 1 or 2 month down the line
switch to my own ltd once all setup ?

You can but then you would have the issue of expenses.

If you only work on one assignment for an umbrella company then the workplace where you do that assignment is a permanent workplace.

This means all the expenses on that assignment while working under the umbrella company are disallowed.

If you decide to use an umbrella company you really need to use the same one for two or more assignments.

Also you need to make sure you get and keep all receipts for your expenses regardless of whether the umbrella company wants to see them or not. You should only claim for what you actually spend and nothing more. Most don't want to see them but there is always the risk of HMRC wanting to.

Some umbrella companies in the recent past have been allowing contractors to claim expenses they weren't entitled to through their dispensations so HMRC started to have a look at them.

[Andrew at Boox]

It sounds like you have loads of questions that you could probably get answered very quickly by calling an accountant for contractors and just asking them.

[Support Monkey]

Your suggestion sounds like a good idea. Umbrella makes it easier to dip in to the contracting world.

Many people set up a company on day 1, change their mind 3 months in, then throw toys out of the pram about all the hassle of closing the company.

If you're new to contracting and unsure, go umbrella then consider changing to Ltd 6-12 months down the line...and if anything I should be biased towards people using companies.

WHS, go umbrella for 6-12 months , its easier to start with, then you can read up on the ins and outs of contracting and make up your mind when you decide if contracting is for you.

Go through Contractor Umbrella there are no nasty surprises with them PAYE Umbrella Company : Contractor Umbrella Home : Umbrella Companies

[kingcook]

Assuming you're outside of IR35, i'd say go down the limited company route.

Compare the differences in pay, umbrella vs ltd co.

I'll let you work out if the extra money you earn with a limited company is worth filling in an extra few forms that any good IT contractor accountancy will help you fill in.

[northernladuk]

Following the OP's posts recently I would say Umbrella to start is a very good idea. I did it for 6 months on my first gig so I could concentrate on getting my first gig nailed and a step on the ladder whilst reading up on the in's and outs of LTDs. By the 2nd gig LTD was set up with a good knowledge of the basics and getting contracts was much easier.

Yes not the most efficient way to start but looking at how some people run their LTD I would argue they are losing more by running their shop badly than if they went Umbrella for a period and then did it right first time.

[Support Monkey]

Following the OP's posts recently I would say Umbrella to start is a very good idea. I did it for 6 months on my first gig so I could concentrate on getting my first gig nailed and a step on the ladder whilst reading up on the in's and outs of LTDs. By the 2nd gig LTD was set up with a good knowledge of the basics and getting contracts was much easier.

Yes not the most efficient way to start but looking at how some people run their LTD I would argue they are losing more by running their shop badly than if they went Umbrella for a period and then did it right first time.

WHS +1

[Greg@CapitalCity]

I think you should start as you mean to continue. I get the vague feeling you are keen to use a ltd company, but are a bit put off by it at this early stage. Put some work in now - read the new starters guide, speak to some contractor accountants, and get a feel for how the whole thing works. Once you have done it for a few months, and your accountant has answered all your questions and given you good feedback, it will feel a lot easier.

There is some admin involved (and responsibility) - using an umbrella is easier - but if you can get your head around that and are happy with it, our clients find contracting through their own ltd company to be rewarding.