Reply to: Ltd Co, umbrella, PAYE, Sole trader.... Whats the correct course?

[Worcsman]

So happy to ask and take advice, but not warn others.

There is no warning to give. They are just another brolly company, they aren't doing anything illegal. I asked advice here specifically about Ltd Co with trust, I had never heard of it termed that way, Ive never used a trust style scheme and never want to. To answer your question, yes I'm happy to take advice, if I felt that I should warn people off from using a company I would probably do so.

Id warn people from using trusts to draw down salary, but that would be pointless and only my personal opinion. Id wager there are plenty browsing these forums that use EBTs and similar, nervously flipping over the brown envelope that arrived in the post to see if it has HMRC stamped on it.

[cojak]

I don't have a problem with that. These cowboys are springing up with new names all the time.

[jmo21]

Nope

So happy to ask and take advice, but not warn others.

[Worcsman]

Care to name the Umbrella?

Nope

[TheDandy]

Hey well thats why Im asking, the umbrella Ive used for years used to push EBTs, I never got involved, sounded bad from the off. But Ive just received an illustration of the Ltd co with trust and 80% retention including accountants fees, invoicing etc. Yes sounds suss! Googled and cant find much on this. I'm told they have been running this for 25 years and never had anyone found to be in breach of HMRC rules. Yes the guy is a salesman, yes I am a cash cow have been for more than 2 decades but never used ltd co plus trust. Is retaining an additional 10% over the 70ish% a normal ltd company would offer worth it? No idea the level of risk. If someone else does, i would be pleased to hear it.

Care to name the Umbrella?

[Rob79]

Yep well I know enough about EBTs to know that HMRC get around 4-5% of the total earned, with 15-16% going to the people behind the scenes. I think it only reasonable that HMRC might think that a little unfair. Just goes to show, last time this was touted to me it wasn't dressed up but just called an EBT, with all the usual bullet proof, been running for years without problems BS, this time it was called a ltd company with trustfund, muddied the waters for me but an hours worth of googling and some interesting advice about vaseline later, I can see it for what it is.

Just think about what the "T" in EBT stands for.

Simples.

[Worcsman]

Well, whatever you decide, just consider this little gem:

People often think that if HMRC come a'knocking, punters will just hold up their hand and say "it's a fair cop Gov!" and hand over the 15%* tax they think they owe (from the Gross/total amount of the contract).

So from a contract total of £100,000 (100%), you think that you might to have stump up £15,000 (15%)

HMRC are looking at it from a VERY different perspective. They think of the money in your pocket as NET (like PAYE, after tax an NI has been taken out), so they will probably calculate your tax as 40% (your figure is 60%) and adding that to get a back calculated figure.

So from a contract total of £100,000 (60%), HMRC think that you will to have stump up the missing 40% = £66,666.

The number of the beast with knobs on, if you like....

*If the punter is dumb enough to think that 15% of their 85% take home pay goes to the taxman

Yep well I know enough about EBTs to know that HMRC get around 4-5% of the total earned, with 15-16% going to the people behind the scenes. I think it only reasonable that HMRC might think that a little unfair. Just goes to show, last time this was touted to me it wasn't dressed up but just called an EBT, with all the usual bullet proof, been running for years without problems BS, this time it was called a ltd company with trustfund, muddied the waters for me but an hours worth of googling and some interesting advice about vaseline later, I can see it for what it is.

[jamesbrown]

Accountants or MSC's?

Both. Accountants occasionally provide bad advice (you'll be shocked to learn ), whether that's about dodgy schemes or more mundane issues. If, as a Ltd Co. Director, you don't have the capacity to evaluate the advice and calculations your accountant is providing, you're on dodgy ground.

Not necessarily, for example JSA are a reputable company and found themselves in administration.

Yes, even companies worth £100m go belly-up occasionally

[cojak]

Im not kicking for the other side. Ive never heard of using a trust fund. Always in the uk used a straight forward ltd company

Well, whatever you decide, just consider this little gem:

People often think that if HMRC come a'knocking, punters will just hold up their hand and say "it's a fair cop Gov!" and hand over the 15%* tax they think they owe (from the Gross/total amount of the contract).

So from a contract total of £100,000 (100%), you think that you might to have stump up £15,000 (15%)

HMRC are looking at it from a VERY different perspective. They think of the money in your pocket as NET (like PAYE, after tax and NI has been taken out), so they will probably calculate your tax as 40% (your figure is 60%) and add that to get a back calculated figure.

So from a contract total of £100,000 (60%), HMRC think that you will to have stump up the missing 40% = £66,666.

The number of the beast with knobs on, if you like....

*If the punter is dumb enough to think that the 15% giving them their 85% take home pay goes to the taxman

[Worcsman]

OK I understand now

Ltd company with trustfund is the same as EBT. No thanks!

[Martin at NixonWilliams]

As have dodgy accountants.

Accountants or MSC's?

Having another link in the chain creates an additional risk, but it's manageable if you opt for a reputable umbrella

Not necessarily, for example JSA are a reputable company and found themselves in administration.

[Worcsman]

Wire in then, but keep the savings back and invest it in Vaseline for when hector comes sniffing.

Thanks for the tip.. Unilever PLC (ULVR.L) General trend is up with a recent dip Could be a good bet

[northernladuk]

Why would you consider this in the OP's circumstances? The contract is one on a 6 months rolling basis. Aside from the occasional 2/3 month contract I am yet to see a contractor with turnover that low.

Am guessing you are not Psychocandy's accountant then.

[jmo21]

Im not kicking for the other side. Ive never heard of using a trust fund. Always in the uk used a straight forward ltd company

Wire in then, but keep the savings back and invest it in Vaseline for when hector comes sniffing.

[Worcsman]

I can understand newbies who've never heard of EBT's and the like to come on here and annoy NLUK by not doing a search, but someone who has been contracting for 20 years, and HAS heard of the schemes, to come on wondering about it?

Im not kicking for the other side. Ive never heard of using a trust fund. Always in the uk used a straight forward ltd company