Can I not do without umbrella / ltd / paye?

[LisaContractorUmbrella]

Under Section 134 of the Income & Corporation Taxes Act 1988 a sole trader working through an employment agency could be viewed as an employee and, if they do not pay the correct taxes, the employment agency could be forced into an employment arrangement and therefore become liable for the deficit.

HTH

[bobspud]

For some unknown reason agencies took a dim view of sole traders several years ago. There is no legislation that says they can't trade with them, they just don't.

However you should think about the liabilities involved in saying I want to go and work on a multi million pound project and have all my worldly possessions at risk while I am doing it...

[d000hg]

So back on the original topic, which I myself wondered about but never cared enough to ask... it seems the answer is:

1)You can legally work as a sole trader
2)Agencies won't deal with you if you do, and even working direct you may have problems

Or did I misunderstand and there is actual legislation in place?

[TykeMerc]

Perhaps to start you off, but longer term you need to be looking at your own limited company.

Take the general advice and stay well clear of the various overseas offerings.

If it sounds too good to be true, it probably is.

Well having your own Ltd isn't a need, but it can be more tax efficient, that tax efficiency can be offset by hassle and IR35 concerns, it's a matter of personal taste.

I agree completely about the overseas schemes, they all represent risk of tax repercussions.

It bears saying at least once a day on here:

If it looks too good to be true then it almost certainly is!!!!!

DON'T think that you can get away with very high takehome %ages as the Taxman will undoutedly molest you in the long term.

[Waldorf]

Thank you all for your mostly helpful remarks. Umbrella it is...

Ramo

Perhaps to start you off, but longer term you need to be looking at your own limited company.

Take the general advice and stay well clear of the various overseas offerings.

If it sounds too good to be true, it probably is.

[brollyman]

you can just be self employed and sort your tax at the end of the year, even when your with an agency.

I do it through an offshore invoicing company, it saves all the messing around weekly, you just do a tax return once a year. I get much more than i could with any umbrella.

Run away, run away!!!

As fast as you can......

[ramotswa]

Thank you all for your mostly helpful remarks. Umbrella it is...

Ramo

[expat]

Hello all,

Might be very ignorant of me to ask, but why all the fuss about setting up my own "company" if i am contracting.
BAck in my country (germany) as long as you pay your taxes you can do what you want.
Why is it not possible to just bill my employer directly, get all the money and then do a tax return at the end of the 3 months / year?

I am about to start a contracting job and am looking into umbrellas, which seems fine for my needs, but I am still curious to why I need them at all.

Any facts or thoughts will be much apprecitated.

Ramo

It is not impossible, but you are very likely to find:
1. If you are going through an agency, they will simply not deal with you that way, for the reason given by TykeMerc.
2. If you are going direct to the client, they will simply not deal with you that way, for the reason given by TykeMerc.
3. The tax authority is likely to refuse to accept that you are self-employed, and instead declare that you are employed by the client. The client is in this case required to pay your tax directly to the government. So if they have not, they are already breaking the law.
Therefore the client will not even take that (very high) risk, and will not deal with you directly.

[Alan @ BroomeAffinity]

you can I do it through an offshore invoicing company, it saves all the messing around weekly, you just do a tax return once a year. I get much more than i could with any umbrella.

I take it you are aware of all the activity HMRC are involved in in this area? If not, can I suggest a search of this site?

[dave20]

you can just be self employed and sort your tax at the end of the year, even when your with an agency.

I do it through an offshore invoicing company, it saves all the messing around weekly, you just do a tax return once a year. I get much more than i could with any umbrella.

[tim123]

Hello all,

Might be very ignorant of me to ask, but why all the fuss about setting up my own "company" if i am contracting.
BAck in my country (germany) as long as you pay your taxes you can do what you want.
Why is it not possible to just bill my employer directly, get all the money and then do a tax return at the end of the 3 months / year?

Because unlike Teutons we don't obey official rules just because they are rules and people have a habit of not doing the "so long as I pay my taxes" bit.

tim

[BolshieBastard]

Hello all,

Might be very ignorant of me to ask, but why all the fuss about setting up my own "company" if i am contracting.
BAck in my country (germany) as long as you pay your taxes you can do what you want.
Why is it not possible to just bill my employer directly, get all the money and then do a tax return at the end of the 3 months / year?

I am about to start a contracting job and am looking into umbrellas, which seems fine for my needs, but I am still curious to why I need them at all.

Any facts or thoughts will be much apprecitated.

Ramo

The UK system is different to that in Germany. That's why.

[TykeMerc]

If you're working at a client on an Agency placement they can't deal with you as a Self Employed Sole Trader due to regulations, as a result you're required to either have a Limited company or work via an Umbrella arrangement.

If you're contracting direct to a client then you can do without a Ltd or Umbrella, but the client may well not contract you on that basis as there's a risk that if you don't pay your tax and NI HMRC will pursue Client Co for the cash.

Unfortunately this is all a result of past actions of contractors not paying their tax and NI liabilities so regulations were put in place.

[ramotswa]

Hello all,

Might be very ignorant of me to ask, but why all the fuss about setting up my own "company" if i am contracting.
BAck in my country (germany) as long as you pay your taxes you can do what you want.
Why is it not possible to just bill my employer directly, get all the money and then do a tax return at the end of the 3 months / year?

I am about to start a contracting job and am looking into umbrellas, which seems fine for my needs, but I am still curious to why I need them at all.

Any facts or thoughts will be much apprecitated.

Ramo