Reply to: Inside IR35. Why choose an Ltd versus an umbrella?

[Taxman]

Remember of course that this is only possible on goods over 2000, if the thing you wish to buy is a service i.e. 10 days at 300 from a limited company consultant then this isn't covered by this reclaim option and you'll have to foot the bill out of your pocket

Fair point boredsenseless. I did indeed quite correctly use the word 'asset', but in retrospect it was good that you made a point of enforcing the difference between an asset and a service. Well said BS.

[oldgeezer]

Good advice if purchasing items valued over £2K and claiming back the VAT even though my company's registered under the flat rate VAT scheme.. thanks 'Taxman' & 'boredsenseless'.

[boredsenseless]

Remember of course that this is only possible on goods over 2000, if the thing you wish to buy is a service i.e. 10 days at 300 from a limited company consultant then this isn't covered by this reclaim option and you'll have to foot the bill out of your pocket

[Taxman]

Hi Malandri,
Yes, been with them 2 years as a Ltd co. They charge £88.13 a month and I'm sure I don't use them as much as I could do, or am entitled to as I rarely need to make contact, other than for the quarterly and annual returns. When I have wanted advice or an opinion, they seem well clued up and I've not had any cause for complaint. I think they offer an umbrella payment scheme or if you prefer a Ltd Co. you can still show sales(invoices) as inside-IR35 or outside IR35.
When I first started I was a bit concerned there seemed to be a lot I had to do myself, i.e keeping track and recording all company sales , expenses etc (as I had previously worked via Parasol) but very quickly found it all worked out a lot easier than first thought.
The best thing for me having a Ltd Co. is the scope to widen my net of customers and have full control of the money coming in to the company. I also registered for flat rate VAT scheme which has reduced the amount of VAT I pay the customs and excise, though it depends on how much you purchase as you cannot reclaim any VAT. There are of course loads of other pros and cons that the esteemed members of this forum could come up with.

Remember under the Flat Rate Scheme that you can still obtain full VAT relief on the purchase of individual assets that cost £2,000 or more (inc VAT).

Ridiculous as it sounds, a piece of equipment costing £2,000 or more can end up costing considerably less than a much cheaper piece of equipment.

At an exact cost of £2,000, the net cost after VAT relief would be £1,702. In simple terms, if you intend spending between £1,702 and £2,000 on a piece of equipment, you'd be better off upgrading to a more expensive item as it will ultimately cost less.

Strange but true.

[oldgeezer]

Hi Malandri,
Yes, been with them 2 years as a Ltd co. They charge £88.13 a month and I'm sure I don't use them as much as I could do, or am entitled to as I rarely need to make contact, other than for the quarterly and annual returns. When I have wanted advice or an opinion, they seem well clued up and I've not had any cause for complaint. I think they offer an umbrella payment scheme or if you prefer a Ltd Co. you can still show sales(invoices) as inside-IR35 or outside IR35.
When I first started I was a bit concerned there seemed to be a lot I had to do myself, i.e keeping track and recording all company sales , expenses etc (as I had previously worked via Parasol) but very quickly found it all worked out a lot easier than first thought.
The best thing for me having a Ltd Co. is the scope to widen my net of customers and have full control of the money coming in to the company. I also registered for flat rate VAT scheme which has reduced the amount of VAT I pay the customs and excise, though it depends on how much you purchase as you cannot reclaim any VAT. There are of course loads of other pros and cons that the esteemed members of this forum could come up with.

[malandri]

Sjd

OldGeezer, are you happy so far with SJD? I take it that you are running an Ltd, i saw SJD have umbrella service as well

[oldgeezer]

Craig, what I meant by a number of income streams are bringing income into the company from a number if different sources, e.g an agency contract, a direct contract to one or more other small businesses, say to install / upgrade / support their computers (could be in the evenings/weekends), and general PC support type work for Joe Public. This way when the agency contract ends you still have a way of earning a modest income if you're not fortunate enough to find another agency contract quickly. This does assume you don't have to take a contract a million files from your base though, and that you have a broad skillset, customer facing skills, blah blah.
I agree that I was simplifying what an accountant does, I apologise.

[boredsenseless]

Cojak and Darren are right and thats why I always tell people to talk to their accountant. Mine has saved me many times over what he gets paid.

It's a no-brainer really

[rooney]

Inside IR35

Having ducked in and out of contracting over the last few years and used my own ltd and umbrellas I have come to the conclusion that when you are inside IR35 you might as well go PAYE umbrella. And the main reason for that is convenience, hassle and most importantly for me insurance. When you have a 3 month contract with a client asking for £2M PI and the contract is worded so it looks like you are inside then it is a no brainer (if the umbrella includes it of course and your role is covered - watch the small print!). If the contract is outside then it is another matter and ltd will give you a better return.

[Darren@UptonAccountants]

Acccountants

The problem with a lot of you guys is that you view accountants as glorified bookkeepers The two are not the same.

But the whole point of paying an accountant £1000 per year is for them to help you save as much money and spend as little tax as necessary LEGALLY.

Very true, there is a vast difference between accountants & book keepers!

Cojak touches on a very valid point, the whole idea of appointing an accountant is to legally save you money.

[cojak]

Please, please, please listen to Malvolio when he talks about this kind of stuff.

The problem with a lot of you guys is that you view accountants as glorified bookkeepers The two are not the same.

Yes, accountants do help you with the payment of NI,tax and VAT, (and bookkeeping if you want them to) but you can get software to do that for you (I use Quickbooks myself).

But the whole point of paying an accountant £1000 per year is for them to help you save as much money and spend as little tax as necessary LEGALLY.

My accountant has saved me much more than I have paid him since I started using him.

[boredsenseless]

Each contract is viewed in its own right with respect to IR35 hence you can have 3 contracts in a year to of which are and one that isn't

You need to account for this accordingly or alternatively you could just take the hit and opt for all 3 to be considered inside. This obvioulsy is not tax efficient but may make your life easier.

Accountants are the way forward here if not then brollies unless you have slightly more than a working knowledge of the tax systems in this country

[~Craig~]

Malandri, you are comparing different things. If you have a Ltd Co. and have decided you are caught by IR35, you shouldn't be paying dividends as part of income. You basically have a £5,000 allowance to offset co. expenses, then there's Employers NI, (pension?) and the remainder is your PAYE salary. Same sort of thing that Parasol do, but you effectively become one of their employees, so don't have Director responsibilities, vat returns etc to deal with.
An accountant can set up a company for you. It's your responsibility (as Director) to decide whether your contract is in/outside IR35 and your pay can be calculated by the accountant accordingly. With a good accountant, (I use SJD) you'll probably spend an hour a month on book-keeping if inside IR35, there's not much to it.
If you run the Ltd Co like a proper business with a number of income streams, overheads like advertising, website, office, stock and expenses, it takes a bit more effort but still isn't rocket science and a good accountant will advise you all along the way.

what do you mean by a number of income streams? If you had more than one contract a year would it be viewed as the same thing?

[oldgeezer]

Malandri, you are comparing different things. If you have a Ltd Co. and have decided you are caught by IR35, you shouldn't be paying dividends as part of income. You basically have a £5,000 allowance to offset co. expenses, then there's Employers NI, (pension?) and the remainder is your PAYE salary. Same sort of thing that Parasol do, but you effectively become one of their employees, so don't have Director responsibilities, vat returns etc to deal with.
An accountant can set up a company for you. It's your responsibility (as Director) to decide whether your contract is in/outside IR35 and your pay can be calculated by the accountant accordingly. With a good accountant, (I use SJD) you'll probably spend an hour a month on book-keeping if inside IR35, there's not much to it.
If you run the Ltd Co like a proper business with a number of income streams, overheads like advertising, website, office, stock and expenses, it takes a bit more effort but still isn't rocket science and a good accountant will advise you all along the way.

[boredsenseless]

If you think dividends attract NI then I would humbly suggest that this is something you should direct to your accountant as you run the risk of getting this horribly wrong otherwise.

On your other issue there are hundreds of other threads regarding the benefits of brolly over ltd and the same number about the benefits of ltd over brolly it really depends on circumstances

Again an accountant is your best bet until you've been around the block a bit