Reply to: I might be better off as an Umbrella

[Moff]

I guess if the Inland Revenue want to make your life difficult, whoever you are they can.

I have even been sent a tax bill when I way PAYE years back, so even that is not safe...

Moff

[ASB]

Maybe, but boredsenseless implied in his/her post that if they were outside IR35 and would definitely win an investigation that they wouldn't need insurance at all.

Unless you're going to defend yourself (which would be rather idiotic) you need to pay for your tax experts/solicitors for the duration of the investigation and the only cost effective way is via insurance. It's not like a court case where if you win you're likely to get awarded costs...

I was simply pointing out that there are some products available which will cover the tax and interest. You suggested this was not the case.

I am aware of the costs of investigations having spent 3 years arguing with the IR and with no insurance. Ocassionally the commissioners (if it gets that far) do award costs against the IR but it is pretty rare.

[Cowboy Bob]

There are some which will cover the costs and tax. They tend to have more stringent entry criteria and require sight of contracts/asessment.

Hers is one http://www.lawspeed.com/providers/pr...ativeview=true

I am sure there are more.

Maybe, but boredsenseless implied in his/her post that if they were outside IR35 and would definitely win an investigation that they wouldn't need insurance at all.

Unless you're going to defend yourself (which would be rather idiotic) you need to pay for your tax experts/solicitors for the duration of the investigation and the only cost effective way is via insurance. It's not like a court case where if you win you're likely to get awarded costs...

[ASB]

IR35 insurance covers the cost of the investigation. It does not cover the tax owed if they find you owe tax. Given that you have to pay for the cost of an investigation whether you are found inside or outside of IR35, the insurance is pretty much a must have IMO.

There are some which will cover the costs and tax. They tend to have more stringent entry criteria and require sight of contracts/asessment.

Hers is one http://www.lawspeed.com/providers/pr...ativeview=true

I am sure there are more.

[Pondlife]

IR35 insurance covers the cost of the investigation. It does not cover the tax owed if they find you owe tax. Given that you have to pay for the cost of an investigation whether you are found inside or outside of IR35, the insurance is pretty much a must have IMO.

Agreed. If you've had the common(?) sense to think about whether you're outside IR35 and have had your contract pass a review then you're likely to win an investigation. The insurance is the way to survive the investigation.

[Cowboy Bob]

I've never really understood IR35 insurance, surely if you think you need it then you are effectively saying that you expect you couyld be IR35. I would use this as a big pointer to a person being not wholly in business in its own right.

Secondly if a major insurer believes your contract is good enough to be worth them covering you then it is going to be watertight, and hence you don't need the cover.

Just a thought

IR35 insurance covers the cost of the investigation. It does not cover the tax owed if they find you owe tax. Given that you have to pay for the cost of an investigation whether you are found inside or outside of IR35, the insurance is pretty much a must have IMO.

[boredsenseless]

You need to do the following:
Spreadsheet -
Umbrella 1 side (giant if you must) - including what they charge to pay you.
Limited the other side- payment on the same means. I would expect you NOT to be paying £1800 in accountancy charges though. (35*52). I - and most on this board would pay FAR less than that!
Payment by the same strategy for umbrella & ltd - salary +divi or whatever
Dont forget to factor in your IR35 insurance though and any other (PII) you may need
If you VAT register, your invoice income will be boosted by 3.4% for the first year, and 2.2% years after that (flat rate scheme) for limited.
Then, when you have a spreadsheet comparing like for like, come & show us the figures! We might believe you then.

I've never really understood IR35 insurance, surely if you think you need it then you are effectively saying that you expect you couyld be IR35. I would use this as a big pointer to a person being not wholly in business in its own right.

Secondly if a major insurer believes your contract is good enough to be worth them covering you then it is going to be watertight, and hence you don't need the cover.

Just a thought

[malvolio]

Why not go read the sticky thread from Simon Dolan at the top. It will explain the basic financials far more clearly. Then work out what ist is you're asking and try again. The bottom line is that nothing is more tax-efficient than your own company, assuming you want to stay off Hector's radar, since apart from anything else, any other variant requires a management fee.

[dmini]

You need to do the following:
Spreadsheet -
Umbrella 1 side (giant if you must) - including what they charge to pay you.
Limited the other side- payment on the same means. I would expect you NOT to be paying £1800 in accountancy charges though. (35*52). I - and most on this board would pay FAR less than that!
Payment by the same strategy for umbrella & ltd - salary +divi or whatever
Dont forget to factor in your IR35 insurance though and any other (PII) you may need
If you VAT register, your invoice income will be boosted by 3.4% for the first year, and 2.2% years after that (flat rate scheme) for limited.
Then, when you have a spreadsheet comparing like for like, come & show us the figures! We might believe you then.

[Moff]

Thanks for that link... might send it to my CSM

I do agree, they are a little bit lapse on the phone sometimes, but all I care about is being paid... and paying as little tax as possible as we all do

Has anyone had any big tax bills because of them ?

Moff

[Cowboy Bob]

Be very careful with Giant. If you do any kind of rudimentary searching here and elsewhere you'll find that a lot of very uncomplimentary stuff is said about them. For example - http://forums.contractoruk.com/thread9454.html

[Moff]

This is through Giant acting as my umbrella company, details are here

http://www.giantgroup.com/umbrella/giantumbrella.asp

They also have insurance against IR35 which is included in the fee I pay them weekly.. http://www.giantgroup.com/limited/giantguarantees.asp

I'm glad I came on here, as if I am doing something vitally wrong with them, then there are many tens of thousands of other people on their books

Moff

[VectraMan]

That spreadsheet you've attached isn't for an umbrella (as in the likes of Parasol) but for the composite type scheme that most people will tell you is extremely dodgy and highly likely to be investigated as it only exists to avoid tax. The figures for the "umbrella" will be more or less the same as what you can do with your own Ltd., whereas the PAYE side are for the absolute worse case of working through an agency as PAYE - which nobody with any sense would do.

If you add the expenses from the left hand side to the right hand side, you'll get roughly what an honest umbrella would pay you, or roughly what you'd get if you're caught by IR35.

Either way, you've been given some bad advice or haven't grasped what people are telling you.

[Moff]

I seem to not be coming across to clearly....

I have been a contractor for years, only now have I decided to think about using my LTD company.

The spreadsheet I have attached includes the £35 a week accountancy fees (1st line on there).

All I want to know is how much better off, if at all I will be if I used a LTD company, as from the information I have found I won't be. This is something I have no knowledge on so possibly using wrong terminology

Moff

[VectraMan]

The PAYE bit was purely as an example... who wants to be PAYE

According to that link, I'll loose 2% extra in deductions..

Why can't people spell "lose" on the internet? It's really not a complicated word.

An umbrella can only do exactly the same as a Ltd. in terms of expenses etc., but if you have a Ltd you get to claim back the VAT (which is something umbrellas keep quiet), and you get to pay yourself as a mixture of low salary and dividends which even at low rates is easily worth £500 per month. No contest really.

It's only if you're caught by IR35 that an umbrella is as near the same as to make it not worth the hassle of going Ltd.