LTD and benefits?

[trumpet]

Hello

I started my first contract last July. It will end this coming July.

I am currently with an Umbrella Company. If I change to an LTD, will it make claiming benefits difficult when the contract ends?

[cojak]

LTD and benefits?

If you aren't planning on staying in contracting I would stay with the Umbrella, particularly if you have claimed accommodation expenses from said umbrella...

[trumpet]

I'm not sure what is happening after July - my contract may be renewed, I may get another contract elsewhere or I may get a perm offer. I'm just not sure right now. Worst case scenario is I'll be out of work for a while and will need to claim benefits.

I am thinking of the LTD route right now because I am on a £230 day rate and currently only seeing £130 of that due to fees and taxes with the Umbrella. Am I right in thinking I'd be doing a lot better with an LTD?

I haven't claimed any accommodation expenses.

[northernladuk]

Have a look at the newbie guides which will explain the benefits and also look in the Umbrella section where there is a sticky thread titled 'Should I trade as an umbrella, limited company or composite'.

Also check the thread below on how to search the forums for questions. There have been many questions from people in your situation so the replies should help you.

http://forums.contractoruk.com/welco...uk-forums.html

Umbrella's would only be preferable financially if you are bringing in under £30k I believe. They are also preferable if you find the idea of running your own finances a bit daunting as you will become legally responsible for your ltd finances and as we see on the forums not everyone seems to be able to step up and do this properly.

With regard to your situation if you are in a role where they believe they will give you a perm offer then you need to stay umbrella as a contract role to perm can smack of IR35. If you have that uncertainty it wouldn't really be worth opening a ltd just for 6 months.

[BolshieBastard]

I am thinking of the LTD route right now because I am on a £230 day rate and currently only seeing £130 of that due to fees and taxes with the Umbrella.

WTF!?

Just say 'NO!' to brollies!

[LisaContractorUmbrella]

WTF!?

Just say 'NO!' to brollies!

I don't think the people at the back quite caught that BB

If you are inside IR35 you will be no better off working through your own Ltd than you would be through a brolly

[BolshieBastard]

I don't think the people at the back quite caught that BB

If you are inside IR35 you will be no better off working through your own Ltd than you would be through a brolly

Sorry Lisa, I know you have to promote brollies but the point here is 'IF' you are IR35 caught. Too many people dont even address this.

And even if I ever was IR35 caught, I've still got a level of independence that a brollie doesnt give.

[LisaContractorUmbrella]

Sorry Lisa, I know you have to promote brollies but the point here is 'IF' you are IR35 caught. Too many people dont even address this.

And even if I ever was IR35 caught, I've still got a level of independence that a brollie doesnt give.

I agree that many people don't address it but many people also don't address what is required of them when they decide to start up a Ltd Co - I would encourage any high earner who can dictate his own terms to go Ltd, it makes sense but to someone brand new contracting who IS a disguised employee and who's earning £20 odd an hour, an umbrella company is a sensible option. Also, some people don't want that kind of responsibility (what you view as independence) and brollies work for them as well - we have loads who fall well into the 50% tax bracket.

You really should spend some time with a good counsellor reliving the obviously traumatic umbrella experience from your childhood in an attempt to rid yourself of this debilitating fear

[Nixon Williams]

If you are inside IR35 you will be no better off working through your own Ltd than you would be through a brolly

That is not quite true!

Even if you are caught by IR35 you would be better off with a limited company, reasons being:

• Contractor can still claim the same expenses as with a brolly
• Available expenses are wider, eg mobile phone, laptop etc
• Flat Rate VAT saving - this can be a considerable saving
• 5% allowance not subject to PAYE/NIC
• Brolly fees can be quite high, some charge a percentage of income, rather than a fixed fee

Brolly's usually charge per week or per month, but do not seem to explain why the processing charge should be more if it is done monthly.

Cannot see why the cost would be more - the charge should be per payment, and if the contractor chooses a monthly cycle they should benefit from this.

Another factor is that the brolly will reclaim the VAT on the contractors mileage but I have yet to see this being passed onto the contractor!

[jamesbrown]

I don't think the people at the back quite caught that BB

If you are inside IR35 you will be no better off working through your own Ltd than you would be through a brolly

It depends how you cut it. Strictly speaking, from things like the VAT FRS and flexibility on expenses (no limits on one client etc.), there could be a worthwhile advantage of Ltd over brolly in a caught scenario. You need to spend a little more time on bookkeeping though and time is money, I suppose The bigger factor is probably going to be the long-term working model rather than the money on one contract. For example, if you plan to have other contracts outside of IR35 (simultaneously or later), a Ltd. has a clear advantage.