Being offered renewal under umbrella, unsure about where to go from here

[Ariosa]

Hi everyone,

I've been reading lots of IR35 related threads (I'm still confused) but I would also really appreciate your feedback on my current situation.

I've been with this client since April 2020, renewed once and current contract ends end of coming March. Client has offered me a renewal but they have determined the status to be inside IR35 and they presented me a list of 4 umbrella companies to choose from.

Question #1:
If I renew with umbrella, am I right to assume that if an HMRC investigation is triggered it can prove to be messy as the nature of the work would be the same as in the previous 2 iterations?

Question #2:
As mentioned, for the extension I'm offered, the client determined the status to be inside IR35. Some of their answers to that HMRC form, I disagree with. Does it worth challenging that and pushing for an outside IR35 status and keep using my limited company or is this a recipe for HMRC disaster?

Question #3:
If I go through umbrella and, as a result, put my limited company in dormant state, are there any implications I should consider from going back using my limited company after the umbrella contract ends?

Question #4:
How the heck do I calculate the increased rate I should ask for if I go umbrella? The nature of my work is quite specific and I should be able to negotiate a much higher rate to conpensate for the increased expenses and taxes through umbrella. But it feels like comparing apples with oranges. With umbrella, there are no dividends or retained profit so the net take home amount is... the net take home amount. With a limited company, there is no such thing, unless you take everything out as dividends and pay the high rate tax on that. So how should I go about calculating what rate I should ask for through umbrella VS my current rate (440) through my limited company??


Thanks & apologies in advance for the lengthy post

[northernladuk]

Yes, no, no, add 35%

[Fraidycat]

The inside determination leaves you more open to HMRC attack for the period since April 2020.

Really you should of had a word with them and got an unofficial verbal intention from them about IR35 status and if it was likely to be inside, moved into an umbrella yourself without any official determination. That would of reduced the risk a bit, although given that they saw you as a contractor who fails CEST it still left you open to attack.

Typically you need a 40% uplift in your rate for outside IR35 to match inside rates.

£500 a day needs to become circa £700 a day to match the same take home.

You will probably have to meet the company in the middle, and be prepared to accept only a 20% uplift. And count yourself lucky to get even that. As most contractors who have been moved inside probably aren't getting anything at all.

[northernladuk]

Really you should of had a word with them and got an unofficial verbal intention from them about IR35 status and if it was likely to be inside, moved into an umbrella yourself without any official determination. That would of reduced the risk a bit, although given that they saw you as a contractor who fails CEST it still left you open to attack.

And how does that make a difference? The determination is made on the role, not the contractor using whatever payment vehicle.

You will probably have to meet the company in the middle, and be prepared to accept only a 20% uplift

Why will he? Are companys meeting half way? Do you know something we don't?

[GhostofTarbera]

Yes, no, no, add 35%

Needs 70% uplift to pay for 1st years tax bill from HMRC


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[Paralytic]

Really you should of had a word with them

..should have...

[Ariosa]

I had this chat with the client already, client took initiative and asked HMRC about my role (no names included in the form I was presented though).

OK from the replies that actually mean someting as well as other related threads, I understand that the risk is increased but not extremely high. Still worrying though.

What would the breakdown be for a £650 rate through an umbrella? Is it only the umbrella company's fees that change?

[cojak]

I had this chat with the client already, client took initiative and asked HMRC about my role (no names included in the form I was presented though).

OK from the replies that actually mean someting as well as other related threads, I understand that the risk is increased but not extremely high. Still worrying though.

What would the breakdown be for a £650 rate through an umbrella? Is it only the umbrella company's fees that change?

No - you will be the employee of the umbrella and will have to pay PAYE taxes.


As GoT said, you'll probably get around 53% of that £650, so around £345 pd.

Take a look at Clarity Umbrella's rate calcs - they are upright and honest.

[eek]

No - you will be the employee of the umbrella and will have to pay PAYE taxes.


As GoT said, you'll probably get around 53% of that £650, so around £345 pd.

Take a look at Clarity Umbrella's rate calcs - they are upright and honest.

Also you can't claim travel expenses from pretaxed income.

That may or may not be significant for you.

[Ariosa]

Also you won't can't claim travel expenses from pretaxed income.

That may or may not be significant for you.

I mainly claim subsidence and computer cost expenses.


And how do pension contributions work through an umbrella? Apparently no corporation tax saving anymore as with a limited company and employer's pension contributions...