Umbrella or Ltd inside IR35?

[ASB]

I'd rather have the hassle and the knowledge that it's only the agent I have to worry about disappearing than having an extra company who could vanish.

Just musing, but you might actually be in a better position if your brolly went TU than you agent.

With the agent you would be an unsecured creditor.

With the brolly I would imagine you would at least be a preferential creditor. Also there is the possibility of getting payment up to 400 (or somewhere around there) for 8 weeks. Plus statutory redundancy from the government (not sure if it still covers unpaid wages or not, I think it used to though).

[DirtyDog]

So, in limited is a bit better - about 3% overall. This may or may not be worth the hassle to you.

I'd rather have the hassle and the knowledge that it's only the agent I have to worry about disappearing than having an extra company who could vanish.

[ASB]

A certain amount depends on rate.

If you are eligible for FRS this will yield you a bit of profit.

Invoice 100k + vat = 120k, pay @ 14.5% = 17,400. Profit = 2,600.

Also there is the 5% allowance = 5,000.

So 7,600 better.

But put in say 1500 inc vat for accountancy fees = 6,100; less CT = 4880.

Plus you get whatever 95k including employers NI yields. This is in effect a salary of pretty much 84,400.

This would yield a net income of 55,900. In addition you could pay the 4880 as a dividend leaving 3660 in your hands for a total of approx 59,560.

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In the umbrella what are the costs? I'll assume 1200 a year which seems a fair average. This will give you 98,800 including ers ni for salary (though with holiday etc it may complicate the way it is paid out a little).

98,800 including Er's NI equates to a gross salary of approx 87,700. This gives a net of 57.800 approx.

So, in limited is a bit better - about 3% overall. This may or may not be worth the hassle to you.

I suspect that accountancy figures and unbrealla costs are likely to be broadly the same.

If you are on a rate which means you can't join FRS most of the savings will disappear since the mainly come from VAT.

If you are not VAT registered the same will be true.

[Clare@InTouch]

I'd have thought that the take-home via Ltd inside IR35 had the potential to be slightly higher than going brolly - FRS savings, 5% expenses etc. That assumes that the costs of an accountant are broadly similar to those of an umbrella company.

This is why it's still well worth going Limited even if you're inside IR35 - there's still profit to be had and it's surely better in your pocket than the taxmans. Plus you're taking control of your own money, not having to rely on a brolly to pay you, and there's a chance future contracts may be outside of IR35. If they are you're all set up and ready to go.

If you're simply afraid that you may be inside then hedge your bets and pay a larger salary and put a fair amount into your pension. It doesn't have to be the full 95% that would be expected under IR35 as you're just being cautious (as opposed to being sure you're inside, as then you'd have to do a proper deemed salary calc), but at least it will mitigate any taxes should HMRC investigate and find you to be inside after all.

Being inside IR35 or deemed to be high risk shouldn't be the end of being Limited, it just means you plan accordingly.

[Craig at Nixon Williams]

I'd have thought that the take-home via Ltd inside IR35 had the potential to be slightly higher than going brolly - FRS savings, 5% expenses etc. That assumes that the costs of an accountant are broadly similar to those of an umbrella company.

Oops!

That's what I meant...I'll edit my post so that I don't confuse anybody else.

Thanks
Craig

[DirtyDog]

The take-home pay is closer when caught by IR35, but still a bit lower with a Ltd.

I'd have thought that the take-home via Ltd inside IR35 had the potential to be slightly higher than going brolly - FRS savings, 5% expenses etc. That assumes that the costs of an accountant are broadly similar to those of an umbrella company.

[mickey]

Broadly, yes. Own company gives you the potential benefit of flat rate vat and a bit more control, v increased admin.

FWIW, caught by IR35 I would probably say brolly for quiet life.

Thank you

[northernladuk]

Every opinion counts

Glad I could add some value.

[mickey]

If I was you I would delete my CUK account and look for something else to do.

Every opinion counts

[Jessica@WhiteFieldTax]

Hey all,

Do I understand correctly that the two options are very similar in terms of take home?

Ta!

Broadly, yes. Own company gives you the potential benefit of flat rate vat and a bit more control, v increased admin.

FWIW, caught by IR35 I would probably say brolly for quiet life.

[GB9]

If you do a one off job through a brolly you will struggle with expenses. And as Craig has said, why would you want to use one anyway? Better off managing your own affairs.

However, expenses are the potential financial impact.

[Craig at Nixon Williams]

Hey all,

Do I understand correctly that the two options are very similar in terms of take home?

I get the impression all major providers of the tax liability cover feel twitchy these days about reimbursing the potential tax liability, even when the contract passes the review. The majors I mean Qdos, Abbey, Accountax and OHara.

Without the IR35 cover I'm not comfortable going on the outside, and hence the question about the brolly is relevant.

Given a choice what would you do and why?

Ta!

The take-home pay is closer when caught by IR35, but still a bit higher with a Ltd.

What gives you the impression that insurance providers are getting twitchy about this? Qdos are still offering their TLC35 cover so I'd assume that they woudl still be happy to defend your case and pay out if they fail...

Given the choice I'd say to go limited, not just for the extra cash but because I'd be more comfortable handling my money than exposing myself to third party risk as you would with an umbrella...

Craig

[northernladuk]

If I was you I would delete my CUK account and look for something else to do.

[mickey]

Hey all,

Do I understand correctly that the two options are very similar in terms of take home?

I get the impression all major providers of the tax liability cover feel twitchy these days about reimbursing the potential tax liability, even when the contract passes the review. The majors I mean Qdos, Abbey, Accountax and OHara.

Without the IR35 cover I'm not comfortable going on the outside, and hence the question about the brolly is relevant.

Given a choice what would you do and why?

Ta!