Recession, IR35, Switch from ltd - umbrella?

[Hotlatte]

Due to the recession and situation with contracts I have decided to close down my Limited company at year-end 09/2010. Specially, when my accountant isn’t fully conversant with IR35 (meaning if I am safe or unsafe). The problem is that contracts are not coming around very frequently and the rates are also not good due to supply and demand situation.

The main reasons for why I want to close the limited company are as follow;

- IR35 sword hanging over the head : Unless someone can recommend an accountant that is very efficient I have heard there are few companies out there that are good but is it worth even trying them?

- No Flexibility : Having a limited company means that one cannot do an Interim job (that brings in cashflow) whilst associated as a Director of a company.

- The running costs : basic obligations towards the running of Limited company although they may not be large but when on the bench it hurts.

- Tax payments : Staying on top of this is slightly difficult for me compared to working for Umbrella company that deducts the tax payment prior to making a payment. Specially, if I am without a contract for few months it puts me behind the game.

The advise I need is will I be making a right decision?

- Moving back to Umbrella company will atleast mean that I will be paid minus the obligatory deductions i.e. tax and NI contribs.

- Home take will not be as good but they will do the accounts and I will work as an employee for them.

- Although IR35 may still apply but I will not be as worried.

- Can always set up a new company when market situation improves?

Will I be making the right decision?

[TheFaQQer]

- IR35 sword hanging over the head : Unless someone can recommend an accountant that is very efficient I have heard there are few companies out there that are good but is it worth even trying them?

Why should an accountant know what your contracts say and what your working conditions are - certainly mine doesn't. Read up on what it means. Read up on how you can defend yourself. Read up on IR35-friendly contracts and working conditions. Join the PCG. Take out insurance if you are that worried about it.

- No Flexibility : Having a limited company means that one cannot do an Interim job (that brings in cashflow) whilst associated as a Director of a company.

Don't understand that point at all - why does having a limited company and being a director of it stop you doing anything else?

- Tax payments : Staying on top of this is slightly difficult for me compared to working for Umbrella company that deducts the tax payment prior to making a payment. Specially, if I am without a contract for few months it puts me behind the game.

If you can't do that, then umbrella is best - if you don't know how to run a business, then don't run one.

- Moving back to Umbrella company will atleast mean that I will be paid minus the obligatory deductions i.e. tax and NI contribs.

Moving back to an umbrella means that you reduce your income potential because you are paying more tax.

- Home take will not be as good but they will do the accounts and I will work as an employee for them.

Well, that's true - there are no accounts to do. You earn less, though.

- Although IR35 may still apply but I will not be as worried.

Oh dear. IR35 cannot apply to work through an umbrella - you can't be a "disguised employee" because you ARE an employee. You will pay tax as an employee, so there is no risk of IR35.

- Can always set up a new company when market situation improves?

You could, yes. But since you don't know much about IR35, or know what you need to do to run a business, I wouldn't.

Will I be making the right decision?

In terms of maximising your income, you won't be making the right decision. An umbrella is the worst option. Second worst is to be a Ltd company but declare yourself inside IR35 (and if you're that worried about it, pay up like the rest of the gullible / scared do). Best is a Ltd outside IR35.

In terms of an easy life, umbrella is best, but you will earn less money.

[malvolio]

WHS - rather more politely than I would have done...

[Hotlatte]

Why should an accountant know what your contracts say and what your working conditions are - certainly mine doesn't. Read up on what it means. Read up on how you can defend yourself. Read up on IR35-friendly contracts and working conditions. Join the PCG. Take out insurance if you are that worried about it.



Don't understand that point at all - why does having a limited company and being a director of it stop you doing anything else?



If you can't do that, then umbrella is best - if you don't know how to run a business, then don't run one.



Moving back to an umbrella means that you reduce your income potential because you are paying more tax.



Well, that's true - there are no accounts to do. You earn less, though.



Oh dear. IR35 cannot apply to work through an umbrella - you can't be a "disguised employee" because you ARE an employee. You will pay tax as an employee, so there is no risk of IR35.



You could, yes. But since you don't know much about IR35, or know what you need to do to run a business, I wouldn't.



In terms of maximising your income, you won't be making the right decision. An umbrella is the worst option. Second worst is to be a Ltd company but declare yourself inside IR35 (and if you're that worried about it, pay up like the rest of the gullible / scared do). Best is a Ltd outside IR35.

In terms of an easy life, umbrella is best, but you will earn less money.

Well i would like to continue to work using my limited company but outside IR35 and exactly how do i do it? I have just taken out professional liability insurance however, yes you are right I am scared to continue to work without knowing what might happen. Hence, the option to close the limited company.

One is not born with skills and trick for running the business and you learn from others specially, with the support of people like yourselves.

What does PCG do in comparison wth having insurance?

What should I do to learn more and not get caught under IR35.

[Hex]

Have a look here:http://www.pcg.org.uk/cms/index.php?...63&Itemid=1261

Download the guide to freelancing which is linked at the bottom.

Read up about IR35.

Get any contracts you get professionally reviewed by an IR35 expert (e.g. QDOS, Bauer and Cottrell).

Read lots of information on forums like this.

[gingerjedi]

Well i would like to continue to work using my limited company but outside IR35 and exactly how do i do it? I have just taken out professional liability insurance however, yes you are right I am scared to continue to work without knowing what might happen. Hence, the option to close the limited company.

One is not born with skills and trick for running the business and you learn from others specially, with the support of people like yourselves.

What does PCG do in comparison wth having insurance?

What should I do to learn more and not get caught under IR35.

FFS I can't take it any more... the correct spelling is 'especially'.

[malvolio]

Visit the PCG at www.pcg.org.uk and read their first timers guide. Join up anyway and you can get to the members only guides available from the website. If you want to learn about IR35 and all the other tnings you don't know that you don't know, this is the best place to find out, providing you don't mind doing a bit of reading by yourself. The guys on here are very good at answering intelligent questions, but "Tell me what I don't know" is not an intelligent question.

PCG don't do insurance. They cover the investigation costs of all members for IR35 cases, with roughly a 99.5% success rate. Go with PCG Plus and you are covered for any tax investigation.

HTH

[Hotlatte]

Have a look here:http://www.pcg.org.uk/cms/index.php?...63&Itemid=1261

Download the guide to freelancing which is linked at the bottom.

Read up about IR35.

Get any contracts you get professionally reviewed by an IR35 expert (e.g. QDOS, Bauer and Cottrell).

Read lots of information on forums like this.

Thanks Hex. Does this apply in my situation where i already own a limited company i.e. this is my 2nd year running.

2ndly, is the contract review done part of the subscription with PCG for each contract that i work on?

[northernladuk]

FFS I can't take it any more... the correct spelling is 'especially'.

It's cause your not down and street with the rest of us gingerjedi!

Thanks Hex. Does this apply in my situation where i already own a limited company i.e. this is my 2nd year running.

2ndly, is the contract review done part of the subscription with PCG for each contract that i work on?

Seriously.. do a bit of reading before posting another question. Your just making yourself look more and more incompetent with every post

[Hotlatte]

Thanks for the responses so far. At this stage I am already thinking of reconsidering my decision.

Especially malvolio your point is noted.

Therefore, let me rephrase my question to all is it worth having PI insurance along with PGC membership.

2ndly, contracts are drwan by Agencies as you all know it. How helpful the agency will be interms of making the contracts the way we want them.