Reply to: Set up company or go umbrella?

[ladymuck]

I am with a brolly (Paystream) and have been so for 7 weeks. I want to switch to ltd whilst still working for the same client because I signed up with Paystream to see if contracting was something for me. But the Paystream contract has a Post Employment Contract Restriction that seems to prevent me from switching to my own company. Did you have this problem?

I guess not as I was able to switch over without any problems. However, that was 13 years ago... I only keep records for 7

[lucyclarityumbrella]

But the Paystream contract has a Post Employment Contract Restriction that seems to prevent me from switching to my own company. Did you have this problem?

What does the restriction actually say?

[webberg]

I am with a brolly (Paystream) and have been so for 7 weeks. I want to switch to ltd whilst still working for the same client because I signed up with Paystream to see if contracting was something for me. But the Paystream contract has a Post Employment Contract Restriction that seems to prevent me from switching to my own company. Did you have this problem?

I'm not a lawyer so perhaps this is a silly question.

Is that restrictive clause legal under UK or EU law?

[jmhsesolutions]

Switching from brolly to ltd

Maybe the landscape back in 2005 was different but that's exactly what I did when I first started. I landed a contract, had no idea what I was doing, so went with a brolly for three months while I worked it all out and set up my LtdCo. I then transferred my contract over to my LtdCo and the agency were absolutely fine about it. It was public sector, too, local county council.

I am with a brolly (Paystream) and have been so for 7 weeks. I want to switch to ltd whilst still working for the same client because I signed up with Paystream to see if contracting was something for me. But the Paystream contract has a Post Employment Contract Restriction that seems to prevent me from switching to my own company. Did you have this problem?

[TheFaQQer]

In my experience, agencies are reluctant to allow people to switch from umbrella to limited mid-assignment as it increases risks of IR35 investigation.

Is there any basis for this idea?

[northernladuk]

Regardless of public or private sector, IMHO if you are considering switching mid-contract, probably best to discuss with the agency at the start and check whether they are happy to do it. Friend of mine about two months ago wanted to switch and the agency point blank refused to agree it mid-assignment (and it was a private sector outside IR35 role).

Nah it's quite different surely. Lots of responsibilities and risk with a PS. With private they just contract and pay a different entity. Makes no difference to them.

[mike67]

Regardless of public or private sector, IMHO if you are considering switching mid-contract, probably best to discuss with the agency at the start and check whether they are happy to do it. Friend of mine about two months ago wanted to switch and the agency point blank refused to agree it mid-assignment (and it was a private sector outside IR35 role).

[northernladuk]

Not sure I agree with this.

If the OP is outside IR35, the contracting model for limited and umbrella is very different. In the umbrella model you are usually supplied as a specific individual and things like AWR apply (so the agency has to get comparable salary info, apply uplifts etc) whereas in the limited model the PSC is supplying a service which may or may not be delivered by the individual.

In my experience, agencies are reluctant to allow people to switch from umbrella to limited mid-assignment as it increases risks of IR35 investigation.

I think the assumption we are going on is this is private sector so can forget all those shenanigans for now. Much simpler and there is or problem switching generally.

It's an assumption though so have to see if the OP will clarify.

[ladymuck]

Not sure I agree with this.

If the OP is outside IR35, the contracting model for limited and umbrella is very different. In the umbrella model you are usually supplied as a specific individual and things like AWR apply (so the agency has to get comparable salary info, apply uplifts etc) whereas in the limited model the PSC is supplying a service which may or may not be delivered by the individual.

In my experience, agencies are reluctant to allow people to switch from umbrella to limited mid-assignment as it increases risks of IR35 investigation.

Maybe the landscape back in 2005 was different but that's exactly what I did when I first started. I landed a contract, had no idea what I was doing, so went with a brolly for three months while I worked it all out and set up my LtdCo. I then transferred my contract over to my LtdCo and the agency were absolutely fine about it. It was public sector, too, local county council.

[BrilloPad]

Limited.

[mike67]

Don't forget you can always start with a brolly, and if you decide to go down the Ltd company route, you always have the option to move once its all set up.

Not sure I agree with this.

If the OP is outside IR35, the contracting model for limited and umbrella is very different. In the umbrella model you are usually supplied as a specific individual and things like AWR apply (so the agency has to get comparable salary info, apply uplifts etc) whereas in the limited model the PSC is supplying a service which may or may not be delivered by the individual.

In my experience, agencies are reluctant to allow people to switch from umbrella to limited mid-assignment as it increases risks of IR35 investigation.

[simondolan]

I moved out of contract market a couple of years ago and shut down my company.

Now looking to get another contract and looking into either being lazy and going umbrella or setting up a new company.

Are there still big benefits of having a ltd as the dividend tax breaks have all but being removed?

Expect to be on a 6 month contract with possibility of further 6-12 months and rate around £600 day.

Ltd financially better, but choose a company which enables you to swap between the two for no additional fees or hassle. Like mine ...

[lucyclarityumbrella]

As everyone said, if this is a short-term thing then umbrella may be right for you, if not then Ltd would net you more (outside IR35).

Don't forget you can always start with a brolly, and if you decide to go down the Ltd company route, you always have the option to move once its all set up.

[gables]

For me the question would be one of 'how long do you intend staying contracting' because on the face of it at that rate a LTD would be my choice.

[Patrick@Intouch]

Obviously there are more elements to consider than just your day rate but, with a contractual day rate of £600 and some expectation of this being more than a short term thing then it would seem that you would be well advised to operate through a limited company.

Although the way in which dividends are taxed has changed and you would be likely to have a liability where previously you may not have. The notional tax credit has also been removed meaning that you actually have to take more income to reach the basic rate threshold.

You do also, of course have more control over your personal income and therefore rates of tax when operating through a PSC than an Umbrella and there is the potential to claim travel and subsistence expenses as well.

This is only a start and you will need to discuss your situation and needs with an accountant.