brolly to limited setup-my case

[Arnie365]

I have been with a brolly for a while now, but I am now considering a limited company setup because of the supposed higher take-home. However, I mostly want to withdraw the entire funds at the end of the month to pay a mortgage. Considering the complicated(to me) nature of salary+dividend way of withdrawl from a limited company, will it be really worth the trouble? Will my eventual take home be still more than a brolly if I intend to withdraw the entire funds and get taxed for that?

[DirtyDog]

Going umbrella means that you pay employers NI, employees NI and PAYE on the whole whack.

Going Ltd (outside IR35) means no NI, no PAYE and paying tax on dividends as necessary.

Going Ltd (inside IR35) means that you pay employers NI, employees NI and PAYE on the whole whack minus 5% for expenses, and whatever you make on the VAT FRS.

Work it out yourself.

[DirtyDog]

To directly address your questions:

Considering the complicated(to me) nature of salary+dividend way of withdrawl from a limited company, will it be really worth the trouble?

Don't know - do the sums

Will my eventual take home be still more than a brolly if I intend to withdraw the entire funds and get taxed for that?

Yes, assuming accountancy is less than brolly fees.

[stek]

What would NorthernladUK say?

[northernladuk]

What would NorthernladUK say?

He would say.....

I presume when you say the entire funds you aware you cannot spend your corp tax and VAT money so will not be withdrawing the whole amount.

There is also legal responsibilities that come with being a director of a limited and you will have to start to understand your company's finances and accounting practices. You are on your own (with the help of the accountant you will engage immediately). No HR department to ring for help like you can with a brolly.

You will also need to get a firm understanding of IR35 as this will affect the way you envisage drawing your money as has already been mentioned.

There are plenty of threads on umbrella to limited in the Umbrella section sticked and a ton of other threads that can be found using the search option detailed below. Many of the threads will have links to calculators you can play with to look at the numbers and you could do with speaking to one of our regular accountants on the phone to work through your exact scenarios.

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

Going LTD you are going to have to stand on your own feet and start doing a lot more of your own research.

Bet you didn't expect him to say that!

[LisaContractorUmbrella]

I have been with a brolly for a while now, but I am now considering a limited company setup because of the supposed higher take-home. However, I mostly want to withdraw the entire funds at the end of the month to pay a mortgage. Considering the complicated(to me) nature of salary+dividend way of withdrawl from a limited company, will it be really worth the trouble? Will my eventual take home be still more than a brolly if I intend to withdraw the entire funds and get taxed for that?

You will only be able to draw dividends from a Ltd Co if you are outside IR35 - you need to consider whether or not you could provide a substitute and whether they would be accepted by the client if you could not attend the contract. Also, how much supervision direction and control are you under from the client and is there mutuality of obligation

[aoxomoxoa]

Bet you didn't expect him to say that!

I think we did, but rather more pointedly as per usual. Have you had a Friday lunchtime pint and come over all mellow?

[Old Greg]

You will only be able to draw dividends from a Ltd Co if you are outside IR35 - you need to consider whether or not you could provide a substitute and whether they would be accepted by the client if you could not attend the contract. Also, how much supervision direction and control are you under from the client and is there mutuality of obligation

And what is the risk of investigation and will you PCG membership or QDOS insurance save you if you are investigated.

[DirtyDog]

Should also add that going Ltd means that there is one less person in the chain to disappear with your money.

[GazCol]

You will only be able to draw dividends from a Ltd Co if you are outside IR35 - you need to consider whether or not you could provide a substitute and whether they would be accepted by the client if you could not attend the contract. Also, how much supervision direction and control are you under from the client and is there mutuality of obligation

Well that's really not right is it Lisa? You're picking on one area of the BET that most, if not all, IT contractors will fail in practice, although probably not in contract. Supervision and MOO, as you also mentioned, are much bigger indicators of disguised employment in my opinion not only are you much more likely to presented with these scenarios they're also much easier to measure, i.e. do you have a line manager you report into and are answerable to, even for non-project related issues? Are you referred to as a contractor on HR documentation? Are you told how to complete your tasks rather than working to your own methods? Do you have to request time off or do you inform the client out of curtosey?

The questions above aren't exhaustive nor definitive when it comes to IR35, but they give you an indication of whether or not it's worth potentially paying for a contract/working practices review to determine your status. For example, if you have to attend normal team meetings and performance reviews with a line manager at a client co, don't even bother with the IR35 review.

If you're confident your working practices fall outside of being a disguised employee, get a review that backs that up, purchase PCG membership and get rid of the brolly. You're throwing money away