Newbie 6months contract Umbrella vs Ltd

[Spangled]

Thanks Chart Accountancy - very useful info and link.

[Chart Accountancy]

You should invoice the full amount ignoring any deductions which are dealt with separately. Your accountant will make your IR35 calculations. If you look at FreeAgent guides on IR35( see a link below)you will find useful information to answer your questions. If you are not already using FreeAgent and you plan further work through your company, it is worth considering finding a FreeAgent accountant.

https://www.freeagent.com/support/kb...n_kbarticle?su

[Spangled]

A goldmine of info on here.

So as a newbie to IR35, I’ve got an accounting question related to the use of limited companies:

I’m about to start a four-month gig, deemed inside IR35, through Capita CL-1. Billing through my limited company (50% shareholder with colleague who has the other 50%). First time we’ve ever had anything to do with IR35 but this is an interesting project very local to me so worth taking on. And seems sensible to bill through our existing limited company.

Day rate is £300. Understand that Capita will subtract around £35 or so to cover employer's NICs, so my company will actually be billing them around £265 a day plus VAT. And also understand that Capita will then deduct tax and personal NICs prior to depositing the remainder in my company account. All good and understood so far.

What I’m not clear on is:

1 I’ll have to complete an online timesheet at the end of each month – but I’ll also have to email/send Capita a VAT invoice, yes? So if I say worked 20 days in the month, the invoice would be for £5,300 (20 x £265) plus VAT of £1,060 which = £6,360. Correct?

2 What funds will hit our company account? I assume it will be my post-tax salary PLUS the VAT? I’ll then transfer out the post-tax salary to my personal account but leave the VAT in the company account to settle our VAT bill.

3 As I understand it, my post-tax salary won’t count towards company income (so I won’t get taxed on it twice) but how do you then account for it in your VAT return? Does my pre- or post-tax salary count towards our company turnover in any way?


I really have searched this site hard for answers to these questions – but do point me in the direction of anything specific.

The Capita team have been unable to give me any answers either!

Cheers.

[polagon]

Hi everyone! First thanks for the help so far. I've just been told by the client that this role will actually fall outside IR35 to my surprise. Being public sector and all.

So that has left me thinking if I shouldn't go down the limited company route. I've started to set up everything with an Umbrella company, but it hasn't been fully finalised yet. And before I do, I wonder what your thoughts on here are:

Summarise: 6 months contract role, public sector but outside if IR35. Will be earning £400 per day. After my contract has finished I will no longer be doing contract roles and my plans are to move to another EU country for the foreseeable future.

Thanks for any help and thoughts on this.

[Patrick@Intouch]

If this is inside IR35 then either brolly or Ltd would provide about the same results as OP would be unable to claim T&S in either case and would pay tax on pretty much everything invoiced.

If this is outside IR35 then that may swing toward Ltd company and the professional advice and steering would really revolve around making sure that the correct costs are being claimed and that the closure is dealt with properly.

It's not necessarily the length of the engagement which is important as you would still need to be aware of your responsibilities and that there are specific orders that need to be followed when closing a company.

[polagon]

Folk on usually mention £25k (or is it £30k?) minimum for it being "worth" going ltd as well.

Ok, and?

[northernladuk]

Folk on usually mention £25k (or is it £30k?) minimum for it being "worth" going ltd as well.

Indeed but just to note that was for an outside gig where T&S was allowed. Difficult to give a figure now as it will depend on how much travel there is. But if he is inside whichever he uses the numbers should still count.

Bottom line is we can't advise the OP until we know the exact details of his situation.

[jmo21]

Folk on usually mention £25k (or is it £30k?) minimum for it being "worth" going ltd as well.

[SlipTheJab]

This is with a public sector client, so my thinking is that it will fall inside. However it wasn't a certain according to the client who would look into this today for me.

Reg leaving the UK it will be for good. Or until my SO has had enough.

What are the 'normal' costs of closing a limited company?
And could you expand on what you mean by: "but this would come with the added benefit of professional advice and steering."?

thank you!

Brolly, next!

[polagon]

Hello,

Firstly, is this role for a public or a private sector client?

If the role is inside IR35 then there would be very little difference, if any between your "take-home" pay under the Umbrella versus a personal service company.

If the role is outside IR35 then it would be wisest to operate through a limited company and structure your remuneration.

Operating a limited company will bring additional costs, such as accountancy and potentially fees related to the closure but this would come with the added benefit of professional advice and steering.

If you are planning on leaving the UK, will this be for good, or short term with a plan to return? The answer to this would impact on whether you were able to claim entrepreneur's relief when closing the company.

This is with a public sector client, so my thinking is that it will fall inside. However it wasn't a certain according to the client who would look into this today for me.

Reg leaving the UK it will be for good. Or until my SO has had enough.

What are the 'normal' costs of closing a limited company?
And could you expand on what you mean by: "but this would come with the added benefit of professional advice and steering."?

thank you!

[northernladuk]

If the role is outside IR35 then it would be wisest to operate through a limited company and structure your remuneration.

Operating a limited company will bring additional costs, such as accountancy and potentially fees related to the closure but this would come with the added benefit of professional advice and steering.

If you are planning on leaving the UK, will this be for good, or short term with a plan to return? The answer to this would impact on whether you were able to claim entrepreneur's relief when closing the company.

He won't be able to claim T&S with a LTD as it's his one and only client will he? That's going to make a LTD look a little less attractive?

Not sure the advantages of professional advice and steering for a single 6 month gig is a deal breaker is it?

[Patrick@Intouch]

Hello,

Firstly, is this role for a public or a private sector client?

If the role is inside IR35 then there would be very little difference, if any between your "take-home" pay under the Umbrella versus a personal service company.

If the role is outside IR35 then it would be wisest to operate through a limited company and structure your remuneration.

Operating a limited company will bring additional costs, such as accountancy and potentially fees related to the closure but this would come with the added benefit of professional advice and steering.

If you are planning on leaving the UK, will this be for good, or short term with a plan to return? The answer to this would impact on whether you were able to claim entrepreneur's relief when closing the company.

[polagon]

Hi there,

I'm about to start a contract role shortly. And I was thinking of going the umbrella route for two reasons. Which is because I will only do the contract role for a maximum of 6 months. After that I'm planning to leave the UK for another European country.
Second which I'm still verifying is that it might be inside IR35. Obviously after learning about IR35 and how it works just a week or so ago I will for sure choose an umbrella company if it's determined to be inside.

However my question for you guys is, if it's not (inside IR35). Would it be worth setting up a limited company for a 6 months contract role? Also taking into consideration my plans of moving abroad post that (if that somehow affects)?
The day rate is £400. Hence me thinking it might be worth going for a limited company.

Thanks for your help!