Reply to: Advice needed guys.

[Wanderer]

After 3 years and many posts on CU I'm still to see a fully fleshed out example of what the advantages of running a limited company are over being with an umbrella company. If you are going to diss using umbrella companies, at least be big enough to provide working finance examples - otherwise I'm afraid you just look like a dick.

I saw this example and thought of you.

I don't know how much you charge but this is for someone earning about 300/day. For a contractor earning ~150/day or contracting for < 6 months then it's probably not worth while.

[Wanderer]

After 3 years and many posts on CU I'm still to see a fully fleshed out example of what the advantages of running a limited company are over being with an umbrella company. Lots of people spit at the thought of it on these boards - but never seem to back up that vitriol with any financial evidence.

There are massive savings to be made with a LTD. You can take dividends and avoid Employer's NI, plus Employee's NI and you can make money from the VAT FRS (5% of your turnover). With a non working spouse you can split the income with them and stay under the 40% tax bracket (if you are a high earner).

On the minus side, there is IR35 but if you get caught then you just have to pay the difference in tax you saved, if you don't get caught then you get to keep the tax. I'll take that gamble. There is more admin but the amount of extra cash you get by having a LTD may make it worthwhile.

As for financial evidence, there are lots of calculators on the web. Go and use one and see for yourself. I don't think anyone is going to try and convince you of the obvious.

If you don't believe us or you just want a quiet life then that's cool. Just stick with your umbrella.

[northernladuk]

Last time I looked, SJD may pile it high, but certainly not cheap. You need to get quotes from a shortlist and go from there. Most of the "sausage machine type" contractor accountants are much the same from what I can see. As long as you do not expect any unprompted advice or guidance from any of them, they're likely to be OK.

To be fair I joined SJD and I get regulard posts from them regarding areas of interest. In the last 2 months alone I have had mails about home offices, home broadband, VAT and something else I forget. All pretty basic stuff as I do a lot of research myself but certainly a welcome mail. The last 2 accountants (one a large firm, another a one man band) did nothing of the sort. For once I have to say I am pleasantly surprised. Ok ok its a sledgehammer approach rather than tailored but very happy to get these.

[Steven@Parasol]

Sorry i meant to add that there are some really useful notes on how to compare contractor accounts, making sure you make a like for like comparison, here:
<snip>

[Steven@Parasol]

From the conversations we have with our Parasol umbrella contractors and ClearSky ltd company contractors, a lot of it comes down to personal choice.

For the ClearSky people, we find a lot of them enjoy/relish the responsibility of running their own ltd company and the advantages that comes with that.

Parasol people are usually fully aware of the financial advantage of going ltd (we even proactively contact them to demonstrate the comparison with working as a ltd) but they simply don't want the 'hassle' (as they see it) of going through all the aspects that Svalbaard mentions in his earlier post.

For some, the additional hours they estimate they would have to spend administering their ltd company could be spent as billable time so it makes more sense to stay with an umbrella.


We also get a lot of people who see umbrella contracting as a good way of dipping their toe into the market before they decide that it is the long-term career they want and migrate to a ltd.

I don't think there are any rights or wrongs with this, it comes down to what works best for the individual. And in our experience the individuals are making informed choices.

[SallyPlanIT]

I appreciate your views and agree that Umbrella route can work very nicely for some.

Others, it won't be the most tax advantageous route as through Ltd company they can manipulate their tax bill, take less income if they wish.

Any accountant or adviser should always discuss both options and provide a comparison between the two. Risks and responsibilities should also be advised when going the company route.

[Svalbaard]

After 3 years and many posts on CU I'm still to see a fully fleshed out example of what the advantages of running a limited company are over being with an umbrella company. Lots of people spit at the thought of it on these boards - but never seem to back up that vitriol with any financial evidence.

I know very clearly what the advantages of being with an umbrella are for me and that is with an income that far exceeds that stated as the (yet again unsubstantiated) threshold quoted by an earlier "anti umbrella" poster.

Yeah yeah... ultimately you probabaly take home around 2% more than me. Big deal. But tell me... accountancy hassles? IR35? End of year returns and associated costs? Not able to touch company income due to uncertainty around on account corporation tax payments? Dividend issue worries? Et Cetera. If you want to have that in your life, then fine. Lucky you.

Me? I prefer to pay a little more (CU charge £80 per month BTW) to make that go away so I can do what I do best, which is enjoying my work and life without finance bothers. End of the month... between 63 & 70% of income earned in my personal account. Done. Dusted. Move on.

If you are going to diss using umbrella companies, at least be big enough to provide working finance examples - otherwise I'm afraid you just look like a dick.

[Fred Bloggs]

Last time I looked, SJD may pile it high, but certainly not cheap. You need to get quotes from a shortlist and go from there. Most of the "sausage machine type" contractor accountants are much the same from what I can see. As long as you do not expect any unprompted advice or guidance from any of them, they're likely to be OK.

[xoggoth]

Best source of what you can claim is HMRC:

HM Revenue & Customs: Expenses and benefits A to Z

Or download booklets 480 and 490.

[gareth01422]

SJD do a guide to expenses That is a very conservative guide but will ensure that you stay well away from any trouble.

In terms of using an accountant, I was always perfectly happy with SJD. Some people aren't.

They offer a pile it high sell it cheap approach to contractor accountancy, along with the others that offer a similar service.

If you are like most other contractors then it works fine.

If you are a needy or difficult person (from your posts it doesn't sound like you are), or want a lot of personal attention because your business is more complex than others, then the contractor specialist accountant approach is not for you.

great post Gonzo

thanks for the info, just off to have a read now.

[Wanderer]

Not required I don't believe if you are are turning over sub-£61k.

You can still register if you want though and then make money out of the VAT Flat Rate Scheme

[SallyPlanIT]

I would have thought that for £140 per month, that they would at least set up the VAT and PAYE scheme for you.

To do the VAT scheme, open a Government Gateway account and register as an organisation and apply for the service VAT registration. Once the scheme is set up you can only file your returns on-line. Paper returns are no longer an option for new registrations.

Register as an employer by email or phone, then add this as a service on your Government Gateway when you receive your employer's starter pack and references.

You will receive 2 forms direct from HMRC, the CT41G which has your corporation tax reference and form 64-8 to authorise your accountant to act on your behalf. You will need codes off your accountant for their HMRC references. The CT41G can take weeks to arrive and needs filing within 3 months of the incorporation.

The VAT registration can take up to 7 weeks to arrive. This does not stop you invoicing your agency as you can raise a VAT only invoice at a later stage. The bank is the next most important step to take so that you can be paid.

Good luck with your business

[Gonzo]

ok, good question,

I was meaning "who will tell me what I can claim for and what NOT to claim for" i.e petrol, accommodation...........

SJD do a guide to expenses That is a very conservative guide but will ensure that you stay well away from any trouble.

In terms of using an accountant, I was always perfectly happy with SJD. Some people aren't.

They offer a pile it high sell it cheap approach to contractor accountancy, along with the others that offer a similar service.

If you are like most other contractors then it works fine.

If you are a needy or difficult person (from your posts it doesn't sound like you are), or want a lot of personal attention because your business is more complex than others, then the contractor specialist accountant approach is not for you.

[Scrag Meister]

1. Register online at the VAT office?

Not required I don't believe if you are are turning over sub-£61k.

[gareth01422]

I don't know where they get the £60 figure from but I agree that it's probably not worth forming a LTD company if your turnover is less than 25-30k/year.

• Get your contract IR35 reviewed and if it's inside then get the agency to change it.
• Do NOT opt-out of the Employment Agency Regulations if the agency offers it
• Consider joining the VAT Flat Rate Scheme unless you are buying and selling a lot of equipment.
• See if you need to get insurance for public liability and/or professional indemnity (your umbrella would have covered this for you previously)

Be aware that you can land yourself in a load of trouble if you run a LTD company without some professional help. HMRC will fine you if you don't file your paperwork ontime and correctly.

I'm sure all the information you need is out there somewhere and (a few) people here will try to help but since you sound like you are fairly new to all this then you should seriously consider kickstarting things by joining the PCG. These guys are on our side and they will sort you out with an accountancy and insurance package and a whole load of good advice to get you up and running.

thanks for the help guys