Is going limited worth it if you are inside IR35?

[socialworker]

Before anyone starts I have done my homework, I am not asking what can I claim etc. What I am asking is what people think about the amount of hassle that will come my way as a result of going from umbrella to limited and thus entering the world of self assessment as a co. director.

From what I have read lately HMRC can be really a pain, incorrect assessments, sending different letters that contradict each other, demanding payments on account that are excessive, etc. Ive already experienced the constant changes of tax coding by leaving my permie job and having a couple of months off then going umbrella.

I have spoken to Crunch who I am thinking of going with - they say providing I keep the records up to date it isn't a problem and they deal with it all. Im sure that is theoretically true but is it a reflection of real life?.

I understand that the kind of work I do is pretty likely to be within IR35- Im pretty risk averse especially with the tightening up, business entity tests etc, so initially I will be paying myself all PAYE and therefore the monetary advantages are slim (flat rate VAT scheme, 5% and about £50 pm saving over umbrella fees). However non monetary advantages I would hope for/expect are:
1) no more agencies saying "we dont deal with your umbrella" and
2)I could do other bits and pieces for my husband's company by invoicing it for actual work done (!) if the social work dries up plus music teaching on the side and put it all through the co.
3) I may be able to get project based work and then I will be set up ready - I was offered some a while back.

On the minus side, professional liability insurance.

I just have a slightly emotive urge to have my own company but if is just going to be more hassle than it is worth then I will resist it.

[northernladuk]

Have a look at this site and put your figures in to the umbrella calculator and the Inside IR35 calculator and compare the differences then have a think how much effort is worth what to you. You are slightly better off with a LTD I believe but as you say there is all the extra hassle with it.

[mudskipper]

I just have a slightly emotive urge to have my own company but if is just going to be more hassle than it is worth then I will resist it.

I did too. I even got husband a myCo T-shirt printed and made him wear it

3 years down the line and I don't give a monkeys. It's a means to an end.

Still, at least my mother can tell her snooty friends that her daughter is a company director.

[malvolio]

Before anyone starts I have done my homework, I am not asking what can I claim etc. What I am asking is what people think about the amount of hassle that will come my way as a result of going from umbrella to limited and thus entering the world of self assessment as a co. director.

From what I have read lately HMRC can be really a pain, incorrect assessments, sending different letters that contradict each other, demanding payments on account that are excessive, etc. Ive already experienced the constant changes of tax coding by leaving my permie job and having a couple of months off then going umbrella.

I have spoken to Crunch who I am thinking of going with - they say providing I keep the records up to date it isn't a problem and they deal with it all. Im sure that is theoretically true but is it a reflection of real life?.

I understand that the kind of work I do is pretty likely to be within IR35- Im pretty risk averse especially with the tightening up, business entity tests etc, so initially I will be paying myself all PAYE and therefore the monetary advantages are slim (flat rate VAT scheme, 5% and about £50 pm saving over umbrella fees). However non monetary advantages I would hope for/expect are:
1) no more agencies saying "we dont deal with your umbrella" and
2)I could do other bits and pieces for my husband's company by invoicing it for actual work done (!) if the social work dries up plus music teaching on the side and put it all through the co.
3) I may be able to get project based work and then I will be set up ready - I was offered some a while back.

On the minus side, professional liability insurance.

I just have a slightly emotive urge to have my own company but if is just going to be more hassle than it is worth then I will resist it.

Yeah, it's such a hassle that almost nobody does it: there are only around 400,000 one man limited companies in the country....

Business Entity tests mean nothing in reality, they have no force in law so can be ignored. The same three key pointers to IR35 are all that matters, so don't be too fast to assume you will inside IR35. Even if you are inside IR35, you get a 5% discount that you won't get with an umbrella and you have control of your own destiny, so why not?

[mudskipper]

Yeah, it's such a hassle that almost nobody does it: there are only around 400,000 one man limited companies in the country....

Business Entity tests mean nothing in reality, they have no force in law so can be ignored. The same three key pointers to IR35 are all that matters, so don't be too fast to assume you will inside IR35. Even if you are inside IR35, you get a 5% discount that you won't get with an umbrella and you have control of your own destiny, so why not?

TBH, it is hassle. Not masses of hassle, but hassle nonetheless. If I was inside IR35 I wouldn't bother. I guess you'd need to work out how much better off a year you'd be, then put a price on the hassle vs. the warm fuzzy feeling of having your own company (a similar effect can be got from a couple of glasses of wine without the hassle).

[malvolio]

TBH, it is hassle. Not masses of hassle, but hassle nonetheless. If I was inside IR35 I wouldn't bother. I guess you'd need to work out how much better off a year you'd be, then put a price on the hassle vs. the warm fuzzy feeling of having your own company (a similar effect can be got from a couple of glasses of wine without the hassle).

Yes, hassle, of course. I must spend hours every year coping with it...

[socialworker]

Thanks all - Yep much as I thought. I have already calculated I would be about 2k better off, not much I know but better than a poke in the eye with a sharp stick. I dont mind doing the admin at all but I like to be able to sleep at night. Maybe the best plan, get contract checked for IR35 but keep back the extra tax you would have paid just in case.

[Jessica@WhiteFieldTax]

Thanks all - Yep much as I thought. I have already calculated I would be about 2k better off, not much I know but better than a poke in the eye with a sharp stick. I dont mind doing the admin at all but I like to be able to sleep at night. Maybe the best plan, get contract checked for IR35 but keep back the extra tax you would have paid just in case.

That's a option a lot of people take up, and it has merit.

But remember its not just the tax, it's potentially penalties as well, although there are ways to mitigate the risk. Talk to a accountant who is IR35/PSC savvy.

[socialworker]

That's a option a lot of people take up, and it has merit.

But remember its not just the tax, it's potentially penalties as well, although there are ways to mitigate the risk. Talk to a accountant who is IR35/PSC savvy.

Thanks Jessica I will certainly do that.

[Gemma at Qdos]

Thanks all - Yep much as I thought. I have already calculated I would be about 2k better off, not much I know but better than a poke in the eye with a sharp stick. I dont mind doing the admin at all but I like to be able to sleep at night. Maybe the best plan, get contract checked for IR35 but keep back the extra tax you would have paid just in case.

Don't forget to review your working practices when you start as well. If you have a contract that is outside IR35, you need to make sure your real working relationship with the end client reflects the contract as well, otherwise the contract isn't worth the paper it is written on. You can switch back and forth within the same contract just with your working practices. As long as you pay your taxes accordingly though, it's not a problem. A good accountant would be able to help you with that.