Umbrella or Ltd inside IR35?

[Clare@InTouch]

I'd have thought that the take-home via Ltd inside IR35 had the potential to be slightly higher than going brolly - FRS savings, 5% expenses etc. That assumes that the costs of an accountant are broadly similar to those of an umbrella company.

This is why it's still well worth going Limited even if you're inside IR35 - there's still profit to be had and it's surely better in your pocket than the taxmans. Plus you're taking control of your own money, not having to rely on a brolly to pay you, and there's a chance future contracts may be outside of IR35. If they are you're all set up and ready to go.

If you're simply afraid that you may be inside then hedge your bets and pay a larger salary and put a fair amount into your pension. It doesn't have to be the full 95% that would be expected under IR35 as you're just being cautious (as opposed to being sure you're inside, as then you'd have to do a proper deemed salary calc), but at least it will mitigate any taxes should HMRC investigate and find you to be inside after all.

Being inside IR35 or deemed to be high risk shouldn't be the end of being Limited, it just means you plan accordingly.

[ASB]

A certain amount depends on rate.

If you are eligible for FRS this will yield you a bit of profit.

Invoice 100k + vat = 120k, pay @ 14.5% = 17,400. Profit = 2,600.

Also there is the 5% allowance = 5,000.

So 7,600 better.

But put in say 1500 inc vat for accountancy fees = 6,100; less CT = 4880.

Plus you get whatever 95k including employers NI yields. This is in effect a salary of pretty much 84,400.

This would yield a net income of 55,900. In addition you could pay the 4880 as a dividend leaving 3660 in your hands for a total of approx 59,560.

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In the umbrella what are the costs? I'll assume 1200 a year which seems a fair average. This will give you 98,800 including ers ni for salary (though with holiday etc it may complicate the way it is paid out a little).

98,800 including Er's NI equates to a gross salary of approx 87,700. This gives a net of 57.800 approx.

So, in limited is a bit better - about 3% overall. This may or may not be worth the hassle to you.

I suspect that accountancy figures and unbrealla costs are likely to be broadly the same.

If you are on a rate which means you can't join FRS most of the savings will disappear since the mainly come from VAT.

If you are not VAT registered the same will be true.

[DirtyDog]

So, in limited is a bit better - about 3% overall. This may or may not be worth the hassle to you.

I'd rather have the hassle and the knowledge that it's only the agent I have to worry about disappearing than having an extra company who could vanish.

[ASB]

I'd rather have the hassle and the knowledge that it's only the agent I have to worry about disappearing than having an extra company who could vanish.

Just musing, but you might actually be in a better position if your brolly went TU than you agent.

With the agent you would be an unsecured creditor.

With the brolly I would imagine you would at least be a preferential creditor. Also there is the possibility of getting payment up to 400 (or somewhere around there) for 8 weeks. Plus statutory redundancy from the government (not sure if it still covers unpaid wages or not, I think it used to though).