Newbie Questions

[Craig@Clarity]

I had thought that dispensations haven't been accepted by HMRC for a decade? I used to work with a guy who had one, and I looked into it (I was going for £120 a night, 3 nights a week) but all I found was that HMRC view was "not any more you can't, keep your receipts"

Feels like a decade. More like 4/5 years but you're right. Dispensations are no more. They were replaced by exemptions which is similar. Still no idea what was advised to the OP though

[Lance]

It's possible the advice was misunderstood. It's also possible that a dispensation was applied for but £1,000 does seem very high even if one was in place. Why not £2,000 or £3,000? It's hard to believe an accountant would give this advice out but I guess never say never. Anyway, just throwing it out there.

I had thought that dispensations haven't been accepted by HMRC for a decade? I used to work with a guy who had one, and I looked into it (I was going for £120 a night, 3 nights a week) but all I found was that HMRC view was "not any more you can't, keep your receipts"

[Craig@Clarity]

no way can you take £1,000 a month in expenses like that.
If it was possible we'd all do it.
You can have £26 a month (home working), plus £5 a night for when you stay away. The rest needs to be receipted and meet certain criteria.
Read the first timers guide over here ------------------------------------------------------------->

It's possible the advice was misunderstood. It's also possible that a dispensation was applied for but £1,000 does seem very high even if one was in place. Why not £2,000 or £3,000? It's hard to believe an accountant would give this advice out but I guess never say never. Anyway, just throwing it out there.

[Lance]

Question 2: Do you mean your limited company has an extension until June, or that you have an extension until June. If your limited company, then your limited company invoices the client and the client pays the limited company. If you have an extension, then the limited company is not involved so no funds should be going to it.
If your limited company has a contract until March at which point the client will terminate and poach your limited company staff to work direct, then your limited company should be asking for compensation from the client. Perhaps they can offer your limited company to buy out the staff - you should be able to negociate a good deal for both the company and the staff. Take legal advice because there are laws about protecting staff transferred to another company. If they think they can just do this without agreement, your limited company should tell the client that poaching staff is an immoral business practice and is not acceptable - just walk away.

I don't think that TUPE counts for company directors. Just a thought.

[malvolio]

Question 2: Do you mean your limited company has an extension until June, or that you have an extension until June. If your limited company, then your limited company invoices the client and the client pays the limited company. If you have an extension, then the limited company is not involved so no funds should be going to it.
If your limited company has a contract until March at which point the client will terminate and poach your limited company staff to work direct, then your limited company should be asking for compensation from the client. Perhaps they can offer your limited company to buy out the staff - you should be able to negociate a good deal for both the company and the staff. Take legal advice because there are laws about protecting staff transferred to another company. If they think they can just do this without agreement, your limited company should tell the client that poaching staff is an immoral business practice and is not acceptable - just walk away.

Yes there are laws about that.

Snag is, that is not what's happening. Only the payment vehicle is changing.

[measterbrook]

Hello All,

I'm a newbie and unsure if these questions or allowed. Apologies in advance and admin please delete or move it to the correct thread.

I'm contracting from last year and almost new as a limited company owner. Below are my questions.

1, Expenses: I know this will open up a lot of questions but please bear with me. Spoke with my accountant on how to log the expenses and he advised me I can take a fixed standard amount for example "£1000" per month (this includes sundry, rent, telephone, internet, stationery and etc plus any other expenses (train tickets, travel expenses, Coffee bills or restaurant bills when spent for clients) can be included when spent using the company card.

Question - Is the above something common and I just want to make sure I'm doing the right thing. I might sound a bit paranoid, lol.

2, Contract: I got an extension to the existing contract (from Oct 20 to January 21) starting from January to June next year. My client is saying the first 3 months is a "General" contract which means they transfer the funds to my limited company and in the later 3 months I have to go and find an umbrella company.

Question - I'm super confused and concerned with their proposal. I'm pushing for 2 separate contracts with different SOW one to end by March and a new one from April to June. Based on my common sense and my basic understanding, my concern is I might be questioned if the same contract with the same SOW is running through 6 months but splitting into two different tax legislation which will be weird.

3, Umbrella Firm: What is the difference between an Umbrella or an agency that processes payments.

Question - Based on my above 2nd question, if I have to go with the umbrella company, how do I know the difference between an Umbrella and an agency?
Also, I see there are many umbrella firms, some offering 90% take home and some offering 60% take home. Why are these discrepancies? When I calculate my take home based on the tax calculator (argument sake 500 a day = £2500 per week), my takehome is around £1500 per week after paying all the taxes. I assume these so-called firms offering 90% are all fake and dummy?

Again, I'm not too worried as I sound but would like to do the right thing hence this forum attracted me to post my questions upon some google search. Apologies if the above doesn't make sense or if I'm not allowed to post.

Regards
Guy

Question 2: Do you mean your limited company has an extension until June, or that you have an extension until June. If your limited company, then your limited company invoices the client and the client pays the limited company. If you have an extension, then the limited company is not involved so no funds should be going to it.
If your limited company has a contract until March at which point the client will terminate and poach your limited company staff to work direct, then your limited company should be asking for compensation from the client. Perhaps they can offer your limited company to buy out the staff - you should be able to negociate a good deal for both the company and the staff. Take legal advice because there are laws about protecting staff transferred to another company. If they think they can just do this without agreement, your limited company should tell the client that poaching staff is an immoral business practice and is not acceptable - just walk away.

[GhostofTarbera]

Thanks All.

1, Expenses - I'll check with my accountant once again and shall change him.

2, I'll ask my client to split 2 contracts.

3, Understood on the 90% take home and shall go with a genuine umbrella firm.

Thanks once again.

You will end up with approx 53-54% of your current gross rate paid into your personal account (ohh an no expenses allowed everything comes out of your net wages)


Sent from my iPhone using Contractor UK Forum

[eek]

Thanks All.

1, Expenses - I'll check with my accountant once again and shall change him.

2, I'll ask my client to split 2 contracts.

3, Understood on the 90% take home and shall go with a genuine umbrella firm.

Thanks once again.

2 - Do not do that. If the client believes the contract is inside IR35 come April, it's inside now (yes I know you are making the determination until April but how do / can you think it's outside when the client thinks the role is inside).

On 3 - it is your responsibility to pay the tax you need to pay on the income you receive - do not let anyone convince you that isn't the case.

[Guy Brown]

Thanks All.

1, Expenses - I'll check with my accountant once again and shall change him.

2, I'll ask my client to split 2 contracts.

3, Understood on the 90% take home and shall go with a genuine umbrella firm.

Thanks once again.

[Lance]

no way can you take £1,000 a month in expenses like that.
If it was possible we'd all do it.
You can have £26 a month (home working), plus £5 a night for when you stay away. The rest needs to be receipted and meet certain criteria.
Read the first timers guide over here ------------------------------------------------------------->

[malvolio]

Hello All,

I'm a newbie and unsure if these questions or allowed. Apologies in advance and admin please delete or move it to the correct thread.

I'm contracting from last year and almost new as a limited company owner. Below are my questions.
1, Expenses: I know this will open up a lot of questions but please bear with me. Spoke with my accountant on how to log the expenses and he advised me I can take a fixed standard amount for example "£1000" per month (this includes sundry, rent, telephone, internet, stationery and etc plus any other expenses (train tickets, travel expenses, Coffee bills or restaurant bills when spent for clients) can be included when spent using the company card.

Question - Is the above something common and I just want to make sure I'm doing the right thing. I might sound a bit paranoid, lol.

the only expenses allowable are those incurred in the pursuit of your business. Coffee, for example, isn't one. You should also be able to produce proof of purchase and VAT receipts (where applicable). You accountant is working in the 1980's, not the 2020's, and is simply giving bad advice - unless you've totally mis-understood what he's telling you.

2, Contract

: I got an extension to the existing contract (from Oct 20 to January 21) starting from January to June next year. My client is saying the first 3 months is a "General" contract which means they transfer the funds to my limited company and in the later 3 months I have to go and find an umbrella company.

Question - I'm super confused and concerned with their proposal. I'm pushing for 2 separate contracts with different SOW one to end by March and a new one from April to June. Based on my common sense and my basic understanding, my concern is I might be questioned if the same contract with the same SOW is running through 6 months but splitting into two different tax legislation which will be weird.

Agree with Ladymuck. You client doesn't understand IR35 (as in you're likely already caught by it) and will drop you in it come April.

3, Umbrella Firm

: What is the difference between an Umbrella or an agency that processes payments.

Question - Based on my above 2nd question, if I have to go with the umbrella company, how do I know the difference between an Umbrella and an agency?

Umbrellas process payrolls and give you an overarching employment contract. Agencies provide people and may process payrolls (but more usually hand that off to another company, often an umbrella). There is a marginal gain in being on an agency payroll, but not enough to worry about

Also, I see there are many umbrella firms, some offering 90% take home and some offering 60% take home. Why are these discrepancies? When I calculate my take home based on the tax calculator (argument sake 500 a day = £2500 per week), my takehome is around £1500 per week after paying all the taxes. I assume these so-called firms offering 90% are all fake and dummy?

No, they are very real. Snag is they are making millions while leaving you with an unpaid tax bill that could be several thousands at best and bankrupt you at worst. Avoid

Again, I'm not too worried as I sound but would like to do the right thing hence this forum attracted me to post my questions upon some google search. Apologies if the above doesn't make sense or if I'm not allowed to post.

You should be. Not knowing these basics is pretty damning, so what else don't you know? I suggest you go back to the starter guides and get reading.

[ladymuck]

Expenses need to be receipted and you should only be claiming for what is wholly and necessary for the running of your business. The fixed rate your accountant is suggesting sounds a bit dodgy based solely on the information you've supplied.

Your contract sounds worrying and I get the impression your client want to drop LtdCo contractors from the new tax year due to the IR35 changes. They will have to issue a different contract for the second half with an umbrella because that contract will be with the umbrella, not your LtdCo. For your client to not understand that an umbrella is a different legal entity is a concern.

The umbrellas offering 90% take home are scams. An agency lines you up for work. An umbrella is a vehicle for enabling you to pay the taxes due on your earnings as if you were an employee (except you're not and there's heaps of info in these fora and the site in general about that). All legit umbrellas will give you a breakdown of your expected take home based on your day rate and tax code. They should ONLY differ in the fee they charge for their service. Expenses are not claimable via an umbrella, except where the client is reimbursing them.

You've got a lot of learning to do!

[Guy Brown]

Hello All,

I'm a newbie and unsure if these questions or allowed. Apologies in advance and admin please delete or move it to the correct thread.

I'm contracting from last year and almost new as a limited company owner. Below are my questions.

1, Expenses: I know this will open up a lot of questions but please bear with me. Spoke with my accountant on how to log the expenses and he advised me I can take a fixed standard amount for example "£1000" per month (this includes sundry, rent, telephone, internet, stationery and etc plus any other expenses (train tickets, travel expenses, Coffee bills or restaurant bills when spent for clients) can be included when spent using the company card.

Question - Is the above something common and I just want to make sure I'm doing the right thing. I might sound a bit paranoid, lol.

2, Contract: I got an extension to the existing contract (from Oct 20 to January 21) starting from January to June next year. My client is saying the first 3 months is a "General" contract which means they transfer the funds to my limited company and in the later 3 months I have to go and find an umbrella company.

Question - I'm super confused and concerned with their proposal. I'm pushing for 2 separate contracts with different SOW one to end by March and a new one from April to June. Based on my common sense and my basic understanding, my concern is I might be questioned if the same contract with the same SOW is running through 6 months but splitting into two different tax legislation which will be weird.

3, Umbrella Firm: What is the difference between an Umbrella or an agency that processes payments.

Question - Based on my above 2nd question, if I have to go with the umbrella company, how do I know the difference between an Umbrella and an agency?
Also, I see there are many umbrella firms, some offering 90% take home and some offering 60% take home. Why are these discrepancies? When I calculate my take home based on the tax calculator (argument sake 500 a day = £2500 per week), my takehome is around £1500 per week after paying all the taxes. I assume these so-called firms offering 90% are all fake and dummy?

Again, I'm not too worried as I sound but would like to do the right thing hence this forum attracted me to post my questions upon some google search. Apologies if the above doesn't make sense or if I'm not allowed to post.

Regards
Guy