Newbie - Umberella company question

[Prodigy]

Thanks for the advice guys.

In response to the last post - I would say that I probably do understand the implications of IR35 which is precisely why I said that I believed my contract fell within this criteria and could anybody recommend any good umbrella companies! I think I would be daft to assume it didn't as it would be bloody obvious that I was an employee in disguise and no amount of MOO, substitution etc in the contract would allow me to disguise even the most basic investigation. The thing I really need to decided is whether a contract route is actually going to be more lucrative in the long run.

From what I gather the formula is hourly rate X 1000 roughly gives you the equivalent yearly salary, so I suppose in my case it is roughly equivalent. Maybe I could try and negotiate a higher rate or just stay permie

[malvolio]

Still don't really understand it do you? Go read the guides and try again. Meanwhile:

a) If you are saying your shiny new contract is merely replacing your current permie role, then you will be IR35'd because that is exactly what IR35 - and the last budget with its attack on small companies - is intended to stop happening. If I read that wrong then fine, but if not be very careful about what you are doing and make sure you understand the implications, and

b) There are two recommended umbrellas for newbies on this board, Parasol and PCG QU, for a good reason. I doubt you currently have the knowledge to go against that advice

[Prodigy]

Ok that seems to make sense. I am currently earning 55K although the employer does not contribute towards pensions at all. I suppose outside IR35 as you state would definitely be more lucrative and almost a no-brainer. The problem I have is that there seems to be two schools of thought (as far as I can see) on here. i.e. you need to be really careful about your working practices and make sure that you are genuinely outside IR35 or to not worry, get an IR35 friendly contract and take your chances bearing in mind the number of wins for HMRC is statistically extremely small. What worries me about the latter is that this may be all well and good for the time being but I believe they can go after you up to 6 years after so surely by this time things may change and you could end up with a hefty back payment/fine.

As far as I am aware no longer limited in just PAYE but uses whatever expenses policy they have to try and inflate the earnings.

[Mickmanus]

Just wondering if anyone can make any recommendations on Umbrella companies for me ? I am considering taking a contract (400 p/day) which would be working for an IT solutions provider as a consultant and as a result my working practice falls clearly within IR35 (I would effectively be doing a permie job but on a daily contract rate). I have used parasol a long time ago and they were good but speaking to NoLongerLimited it seems they may be able to pay (slightly) more....

Any advice much appreciated ?


Thanks

I would have thought that No longer limited services could be interpreted as a managed service company.

[ASB]

So basically - sod IR35 as there is not a massive chance of getting caught. Set up a limited, pay minimum wage and draw the rest as a dividend ?

Assuming I did go down the umbrella company route and the client kept renewing my contract surely it has to be better than taking a 55K base. I know I need to knock off holidays and benefits (well lets see BUPA - 150 quid a year, no pension in my current role, yeah thats about it) it must work out better. Am I missing something ?

Depends what you are trying to compare.

In terms of "cost of employment":-

50k employee gets you 1600 hours at a cost of

50,000 salary
6,500 Er's NI
5,000 Pension
500 life insurance
500 health insurance

= 62.500. Or £40 per hour.

If you are being offered 50k or 50ph contact the latter shoulds yield about 12k pa net more inside IR35 - but you've had all the benfits includied in that. Might be worth it to you might not.

Effectively you are being offered a 24% risk premium - which seems fair enough.

Outside IR35 you could make hay.

[malvolio]

So basically - sod IR35 as there is not a massive chance of getting caught. Set up a limited, pay minimum wage and draw the rest as a dividend ?

Assuming I did go down the umbrella company route and the client kept renewing my contract surely it has to be better than taking a 55K base. I know I need to knock off holidays and benefits (well lets see BUPA - 150 quid a year, no pension in my current role, yeah thats about it) it must work out better. Am I missing something ?

Lots. I'm not writing it all out again, but you can add free training, skills updates and career progression to the list.

If you go umbrella, you are their employee so no difference there, but you pay full PAYE and get no employee benefits and possibly a restricited expenses scheme. I really can't see the point.

If you get your own Ltd, on the numbers you are talking about, there's a tax difference of close to £19k net income, so go umbrella and kiss that goodbye. Do you really want to lose £350 a week?

I still say you're better off as a permie, but what do I know.

Oh, and to answer the original question about which one - PCG's QU offers a good package deal - www.pcg.org.uk

[freshblue]

Just wondering if anyone can make any recommendations on Umbrella companies for me ? I am considering taking a contract (400 p/day) which would be working for an IT solutions provider as a consultant and as a result my working practice falls clearly within IR35 (I would effectively be doing a permie job but on a daily contract rate). I have used parasol a long time ago and they were good but speaking to NoLongerLimited it seems they may be able to pay (slightly) more....

Any advice much appreciated ?


Thanks

Parasol

[Prodigy]

So basically - sod IR35 as there is not a massive chance of getting caught. Set up a limited, pay minimum wage and draw the rest as a dividend ?

Assuming I did go down the umbrella company route and the client kept renewing my contract surely it has to be better than taking a 55K base. I know I need to knock off holidays and benefits (well lets see BUPA - 150 quid a year, no pension in my current role, yeah thats about it) it must work out better. Am I missing something ?

[malvolio]

OK, your call. The contract and the working conditions are an issue if you said you are outside and Hector decided you aren't. With a 2000:3 loss/win ratio, that's a good gamble.

Put it another way then - apparently more cash in hand but you'll need a new job every 3-6 months, you get no employment rights, no security, no benefits, no SSP, no pension and no holidays, and you are paying someone else to move your money around and give you some of it back. By most estimations, £400pd is around £50k real salary. You'd be better off as a permie IMHO, but if you insist on pretending to be a contractor to get the money, get a Ltd and save another 5% or so nett income. And I still think you'll be worse off.

[Prodigy]

How is that possible then - I have done a lot of research on this and I can't see how I can get it outside. My prospective role would involve the following which I think puts it inside IR35 (I'm happy to go outside via Ltd if I can but I don't see how).

- I would be working full time for one client - even if I had nothing to do I would still get paid.
- It is a permie job, its just that I have option of taking it as a contract as even within IR35 it pays more. Fundamentally i comes down to a choice of taking 55K a year (permie) or 400/day (contract). And latter will obviously pay more even after not having paid holidays, sick leave etc...

I could certainly get all of the contract clauses put in to make it IR35 friendly but I was under the assumption that IR35 was based on working practice and not a few choice clauses.

[malvolio]

Thud....thud....thud....

I am considering taking a contract (400 p/day) which would be working for an IT solutions provider as a consultant and as a result my working practice falls clearly within IR35 (I would effectively be doing a permie job but on a daily contract rate).

No it won't. Mine doesn't, why should yours? Go do some research on D&C, MOO and Substitution, save yourself around £19k tax a year and stop proving to Gay Gordon that IR35 is a good idea.

[Bluebird]

Regardless of which umbrella you use the outcome should be the same, the only difference could be the "value" of expenses that each say you can claim.

If one says you can claim for X and the says you can't - think about the fact that HMRC says what you can claim not the umbrellas.

If one is saying NO the chances are the claim is dodgy, and if you get pulled up it's you'll who'll carry the can NOT the umbrella - if you willing to take that sort of risk - perhaps you should try Ltd ? - it still may work out cheaper than a brolly.

[Prodigy]

Just wondering if anyone can make any recommendations on Umbrella companies for me ? I am considering taking a contract (400 p/day) which would be working for an IT solutions provider as a consultant and as a result my working practice falls clearly within IR35 (I would effectively be doing a permie job but on a daily contract rate). I have used parasol a long time ago and they were good but speaking to NoLongerLimited it seems they may be able to pay (slightly) more....

Any advice much appreciated ?


Thanks