switching from Limited Company to Umbrella with same client?

[vmaf]

Hello Forum members
I am thinking of winding down my limited company and start invoicing a client through an umbrella company instead and I have a set a question which you might be able to answer.

Have ever had a problem changing company you invoice through with a client upon renewal?
will HMRC cause me any headache if I am winding down company but still working for same client through an umbrella company?
could entrepreneur relief be affected?
any eventual issues with IR35?

Did you finally go to this route? Any issues? hope you are still receiving forum messages...
I am in a similar situation but also moving abroad, so I'd like to close the company before the end of the year because the tax year in the new country is from Jan-Dec and the % for Capital Gains is much higher than the 10% Entrepreneurs Relief. That's why I am thinking in working in the same client as an umbrella for the last 2 months of the year (assuming 40% tax in the 2 "salaries").
Thanks !!

[TheCyclingProgrammer]

He's going from LTD to Umbrella not the other way round or am I missing something?

I think Wanderer got the wrong end of the stick.

[Sausage Surprise]

It's no problem at all. Just tell the agency (or client if you are direct) that you are now trading as a LTD company and will invoice via that method. Be careful with the umbrella and expenses, there were suggestions here that some of them will try to disallow your travel and subsistence expenses claim retrospectively if you have only done one engagement with them. If they don't know you are quitting until after the last month's salary is paid then that might not happen.



No, but you need to be aware of how much salary you have been paid so far this tax year and consider not drawing any salary or dividends until 6th April. This depends on what your personal finances are like and how much income your company will have so get professional advice. Get an accountant from day one to make sure you do it right and don't make any expensive mistakes.



No, I can't see any reason why it would.



None other than the usual advice which is to get your contract professionally reviewed.

Good luck!

He's going from LTD to Umbrella not the other way round or am I missing something?

[Sausage Surprise]

Hello Forum members
I am thinking of winding down my limited company and start invoicing a client through an umbrella company instead and I have a set a question which you might be able to answer.

Have ever had a problem changing company you invoice through with a client upon renewal?
will HMRC cause me any headache if I am winding down company but still working for same client through an umbrella company?
could entrepreneur relief be affected?
any eventual issues with IR35?

No, they will love it that their IR35 scare tactics are still working.

[TheCyclingProgrammer]

The scope of the TIS rules is fairly wide, but if you look at the main circumstances that would be likely to trigger an investigation, I wouldn't worry too much.

CTM36875 - Particular topics: transactions in securities: identification of cases and submission to AAG Clearance & Counteraction Team

The normal scenario that would normally bite in these circumstances is where assets (including trade, goodwill and equipment) other than cash are transferred from one company to another with mostly the same shareholders prior to its liquidation, then the cash being extracted by way of a capital distribution.

I can't see how that would apply here as even though you are arguably transferring trade (the current contract anyway) to the umbrella, you aren't a shareholder of the umbrella.

That's not to say for certain you wouldn't be caught but it seems incredibly unlikely, unless you start up another company not long after and continue the same trade (which it doesn't sound like you are planning to do). Even in that scenario, nobody is really certain to what extent you could be caught. An ordinary liquidation is not within the scope of TIS legislation.

[Martin at NixonWilliams]

Hello Forum members
I am thinking of winding down my limited company and start invoicing a client through an umbrella company instead and I have a set a question which you might be able to answer.

Have ever had a problem changing company you invoice through with a client upon renewal?
will HMRC cause me any headache if I am winding down company but still working for same client through an umbrella company?
could entrepreneur relief be affected?
any eventual issues with IR35?

There is no issue switching from ltd to an umbrella (although I am curious why you want to do this), nor will there be any problems with HMRC.

Entrepreneurs relief could be affected as you may be caught by the transactions in securities legislation. The legislation has a lot of scope but in this sense it would exist to stop a tax advantage from being obtained as a result of a company being wound up using ER to extract the cash, and then the same trade continuing through a separate entity.

A 'tax advantage' in this sense is any advantage over the tax that would have been payable had the funds in the company been taken as dividends. You could therefore take the funds as dividends to be on the safe side.

I hope this helps.

Martin

[DirtyDog]

It's no problem at all. Just tell the agency (or client if you are direct) that you are now trading as a LTD company and will invoice via that method. Be careful with the umbrella and expenses, there were suggestions here that some of them will try to disallow your travel and subsistence expenses claim retrospectively if you have only done one engagement with them. If they don't know you are quitting until after the last month's salary is paid then that might not happen.

If you have claimed expenses which should have been disallowed, then it's down to you to resolve that with HMRC via your self assessment or your tax code and PAYE.

If you only have one engagement, whether that is through Ltd or umbrella, the location cannot be seen as a temporary work place, so claiming some expenses that should be claimed would be tax evasion.

[DirtyDog]

could entrepreneur relief be affected?

No, unless you are going to setup a new Ltd and do the same kind of work soon.

any eventual issues with IR35?

The only one I would think is whether HMRC look at your current operation (I assume you are outside IR35 and taking low salary and dividends) and then question why you would want to move from an outside IR35 position to one where you are an employee.

Unlikely that they would put the two together, let alone make a charge that could stick, though.

But why would you want to do this?

[cojak]

My only strong piece of advice is to USE REPUTABLE UMBRELLAS ONLY.

Don't be fooled by any dodgy outfit promising >85% take home pay.

Heed this poor (in all senses of the word) chap:

In hindsight , i have been naive to say the least but it was sold to me as a legal scheme, with take home pay on a par with a limited company. The only real reason i agreed was that it was put to me the main advantage would be less administrative burden. And i will stress the word sold , i had never heard of the schemes before , its not as if i went looking for their services, i was actually refereed there by a FTSE 250 recruitment agent. Of course had i been able to predict the possibility of retrospective legislation and understood that the legal opinion of a QC means absolutely nothing i would have ticked another box instead.

[Wanderer]

Have ever had a problem changing company you invoice through with a client upon renewal?

It's no problem at all. Just tell the agency (or client if you are direct) that you are now trading as a LTD company and will invoice via that method. Be careful with the umbrella and expenses, there were suggestions here that some of them will try to disallow your travel and subsistence expenses claim retrospectively if you have only done one engagement with them. If they don't know you are quitting until after the last month's salary is paid then that might not happen.

will HMRC cause me any headache if I am winding down company but still working for same client through an umbrella company?

No, but you need to be aware of how much salary you have been paid so far this tax year and consider not drawing any salary or dividends until 6th April. This depends on what your personal finances are like and how much income your company will have so get professional advice. Get an accountant from day one to make sure you do it right and don't make any expensive mistakes.

could entrepreneur relief be affected?

No, I can't see any reason why it would.

any eventual issues with IR35?

None other than the usual advice which is to get your contract professionally reviewed.

Good luck!

[LisaContractorUmbrella]

Hello Forum members
I am thinking of winding down my limited company and start invoicing a client through an umbrella company instead and I have a set a question which you might be able to answer.

Have ever had a problem changing company you invoice through with a client upon renewal?
will HMRC cause me any headache if I am winding down company but still working for same client through an umbrella company?
could entrepreneur relief be affected?
any eventual issues with IR35?

It shouldn't make any difference to the client as you will just be invoicing through one company instead of another. HMRC won't care as you will be an employee of the umbrella company who will pay you though PAYE so tax and NI will be fully accounted for. I assume that you are asking about IR35 as you have been drawing dividends from your company? If you were genuinely in business on your own account there would be no reason to suppose that there would be any IR35 issues but I would then question why you have decided to move to an umbrella company as, outside IR35, you would be financially better off staying with your Ltd Co.

Re the entrepreneurs relief - can't help on that one but I am sure that someone will be along soon who can

[EasyMan]

Hello Forum members
I am thinking of winding down my limited company and start invoicing a client through an umbrella company instead and I have a set a question which you might be able to answer.

Have ever had a problem changing company you invoice through with a client upon renewal?
will HMRC cause me any headache if I am winding down company but still working for same client through an umbrella company?
could entrepreneur relief be affected?
any eventual issues with IR35?