Reply to: HELP LTD Company VS Umbrella

[mwoz03]

Hi northernladuk

Thanks for the tip, I have managed to post a new one - if you don't mind I will try and delete this post. and I can copy our threads to the new post?

I am VAT registered but my agency hasn't been paying me VAT... as the whole contract will amount to £35k max is it worth asking them to backdate the VAT?

My insurance monthly payment with QDOS: TLC (IR35 cover): £35 + Professional Indemity £12 = Total insurance £564 pa (the previous figure was incorrect).

Best wishes
M

[northernladuk]

Hi northernladuk
I have read :

http://forums.contractoruk.com/busin...endations.html

http://forums.contractoruk.com/accou...companies.html

http://forums.contractoruk.com/accou...-umbrella.html

just want to know how to work the figures out and whether there are any items I need to deduct.

where is the new 'post button', please?
thanks again

Top left above bold title of this section and underneath the breadcrumb links. bout an inch from the top left logo.

Thing is you don't intend to be out of contract more than in and the obvious choice when you are in contract (and out of IR35) is LTD so why not stick with that.

There are a number of calculators highlighting the difference out on the web. Do a google and try them. See if the numbers you have match theirs.

p.s you don't mention VAT in your numbers but if you are on the FRS you can add a couple of % profit
P.p.s. your insurance seems a bit high. QDOS do the same for around £250 with some contract checks thrown in.

[mwoz03]

Hi northernladuk
I have read :

http://forums.contractoruk.com/busin...endations.html

http://forums.contractoruk.com/accou...companies.html

http://forums.contractoruk.com/accou...-umbrella.html

just want to know how to work the figures out and whether there are any items I need to deduct.

where is the new 'post button', please?
thanks again

[northernladuk]

Hi all

I am not sure how to start a new posting so have piggy back on this one - hope the original poster won't mind.

They probably won't but its a pretty daft thing to do. Start your own thread so it get some focus and doesn't pull this round to just your problems for the next however many replies.

Also did you actually read the sticky about the difference that is mentioned in this thread?

[mwoz03]

How to decide on : Limited Company or Umbrella Company?

Hi all

I am not sure how to start a new posting so have piggy back on this one - hope the original poster won't mind.

I have read some postings and finally found this post again =) Thanks for all have posted they were great help, espeically
about umbrella companies I would appreicate if I may ask for some advise.

I have setup a limited company but as I seem to be more out of contract then being in a contract, I was wondering how I can calculate my net pay, ie whether I am better off using a limited company or an umbrella company?

1/
Since 6 April, I have been lucky and started a £250/day rate contract from 12 Apr 2010 but have been told today that it will end on 30 Sept 2010 (nearly 6 mths contract) and so fat not managed to get an interview for another contract (and there was an eight month gap between my last contract)

================
LIMITED COMPANY
================

My accountant tells me:

My limited company is liable in 3 things
• Corp tax - keep 16 to 17% of whatever invoice charged
• VAT - only on income whatever I have collected
• Paye ni- only when I have run a payroll
• accountancy fees and insurance -

I was wondering whether anyone would mind helping me out to calculate whether I should go umbrella or stay limited
I am basing this on working 48weeks /year = £250 x 5 x 48 = £60,000

Corp tax at 20% = £12000
PAYE £400pcm x 12 = £4800pa (I pay myself £1000pcm and the rest by dividends)
Accountant monthly fixed fee of £80 + VAT x 12 = £1128 (plus £100 Self assessment optional, 12mths minimum charged)
Insurance = £492pa

TOTAL deduction £18420 pa

Am I correct in thinking £60000 - 18420 = net £41580

======================
UMBRELLA COMPANY
======================

Do I only need to calculate
1/ what the umbrella company fees are and that's it?
as the cheapest one I can find is £26.50 weekly (gross) which includes insurance but as I just read the other postings which mentioned tax etc which I am liable I am not sure which route I should take, I read somewhere if the income is more than £25000/year then Ltd Company is the way to go.


================
ON ANOTHER NOTE
================
I have only submitted my timesheet for the first 9weeks (apr - jun) as I had problem with my bank account so those weeks were paid into my limited company, but have not pay to my personal account yet. If I decide to go umbrella company will I have to still do my accounts myself or can I redirect the payment so that I don't.

Just looking at the amount of PAYE and corporation tax I have to pay, makes the Umbrella company route looks better but then if it is better why are so many using limited companies?
one other question, why do the umbrella company include the 'employer's NI' in their breakdown as if I have to pay for that?


Thanks for reading and any help would be appreciated.

M

[Wanderer]

Amateurs, the pair of you. The real trick is to answer the question while still being a grumpy old git...

I'm learning but obviously still have a long way to go, master.

WE never found ouit if he did or not, actually. Jon Bessell kind of stopped talking once the case was done, quite understandably.

Hmm, funny that. If I was a conspiracy theorist then I would wonder if some kind deal was quietly struck.... As has been said, the HMRC are not after individuals, they are after the high profile precedent to get the great unwashed masses to toe the line which is several orders of magnitude more valuable.

[THEPUMA]

He must have had a substantial bill for NIC's - it's been reported that the total settlement was close to £100k - what makes you think that it didn't cost him a penny?

This is the whole point of what I have been saying. It is a corporate tax and his company had no assets. The liability can rarely be transferred to the individual and wasn't in this case, as I understand it.

[LisaContractorUmbrella]

What makes you think that?

Financially, he was no worse off, other than the cost of defending himself. I believe his professional costs were covered by the PCG so the only other costs would have been any loss of income while he was defending himself.

But from a pure tax perspective, it didn't cost him a penny, so I understand.

He must have had a substantial bill for NIC's - it's been reported that the total settlement was close to £100k - what makes you think that it didn't cost him a penny?

[THEPUMA]

I think that John Bessell may not agree with you

What makes you think that?

Financially, he was no worse off, other than the cost of defending himself. I believe his professional costs were covered by the PCG so the only other costs would have been any loss of income while he was defending himself.

But from a pure tax perspective, it didn't cost him a penny, so I understand.

[LisaContractorUmbrella]

But the seriousness, in finanical terms, of losing an IR35 case is usually minimal as anyone he is well-advised won't pay any additional tax or penalties or interest. Other than by virtue of having to take surplus profits as dividend rather than a capital dissolution.

I think that John Bessell may not agree with you

[THEPUMA]

I was using the term loosely, rather than the HMR&C definition, trying to convey the seriousness, in financial terms, of losing an IR35 case

But the seriousness, in finanical terms, of losing an IR35 case is usually minimal as anyone he is well-advised won't pay any additional tax or penalties or interest. Other than by virtue of having to take surplus profits as dividend rather than a capital dissolution.

[LisaContractorUmbrella]

How much were the penalties in that case then? I thought he got away without paying anything over and above what he would have paid had he not been caught by IR35.

PUMA

I was using the term loosely, rather than the HMR&C definition, trying to convey the seriousness, in financial terms, of losing an IR35 case

[malvolio]

My understanding is that he didn't. If he did, it would have been on a "voluntary" basis as the company certainly had insufficient funds to pay.

Which, if true, supports the contention that HMRC pursue these cases to set precedents, not to recover taxes. You will recall that the Arctic case - which ended up costing everyone involved around £1m - was actually chasing a debt of a shade over £7k. Most contested investigations run out at £15-20k and as we have seen the recovered amounts are unlikely to cover that cost, even if they win.

All of which rather strengthens the idea that Hector's master plan is to scare as many people as possible into paying taxes they don't actually owe...

[THEPUMA]

WE never found ouit if he did or not, actually. Jon Bessell kind of stopped talking once the case was done, quite understandably. The oft-quote £90k was the total tax and interest due on the IR35-caught contract, which would have been reduced by whatever personal and corporate taxes had already been paid. A rough guess put that at around £7k per year. Certainly there was no imposition of additional penalties.

My understanding is that he didn't. If he did, it would have been on a "voluntary" basis as the company certainly had insufficient funds to pay.

[malvolio]

I don't think he paid the additional tax either.

WE never found ouit if he did or not, actually. Jon Bessell kind of stopped talking once the case was done, quite understandably. The oft-quote £90k was the total tax and interest due on the IR35-caught contract, which would have been reduced by whatever personal and corporate taxes had already been paid. A rough guess put that at around £7k per year. Certainly there was no imposition of additional penalties.