Reply to: Should I trade as a Limited Company, umbrella or composite

[Maslins]

My take on it, are you confident that:
1) you'll be contracting for at least one year, ideally 2+, and
2) your contracts will most likely all be outside IR35, and
3) you're reasonably competent with paperwork/finances?
If yes to all the above, form a Ltd Co.

If no to any of the above, go umbrella. Reasons being:
1) if it's very short term, the hassle of setting up a company, registering it and yourself for various taxes, only to need to reverse all of that months later easily outweighs any benefits.
2) if they'll mostly be inside, then by trading via a Ltd Co you'd pay all the tax of an employee, yet have the trivial rights and significant responsibilities of a contractor (ie worst of both worlds).
3) even with the help of snazzy software and an accountant, you'll still need to keep track of lots of admin things, and ensure you set aside sufficient funds for taxes when they fall due.

[lucyclarityumbrella]

It's a complex world you know

Let me work through Xmas and come back to you!!

[northernladuk]

Let me have a think and I will put something past you

Still thinking?

[lucyclarityumbrella]

Let me have a think and I will put something past you

[cojak]

This thread is massively out-of-date.

Would someone please consider a separate post along the same lines? I'll replace this with that one.

TIA Chaps...

[JulesInch]

I'd go farther and say that this should be a sticky thread at the top, and newbies should read it before asking those same questions less cogently.

Aye, me too. Good succinct post that every one should read. Sticky, please!

[jetrimby]

offshore companies

HI, New on site so please dont shoot me down too hard! Picked up a thread from another site and saw some of the comments.
First I run a v small accounting practice specialising in tax and with some 20 years experience have seen a few contractors over the years!
There is a lot of knocking of offshore companies on this site and I am sure they are often justified but I think it must be pointed out that, most especially where IR35 is a risk or reality, the savings can be huge.
The Revenue have tried to attack some of them and failed and more importantly they have so far failed to find a way of changing the legislation to attack them without effecting too many others.
I joined a specialist network to widen my possible assistance into loophole planning and this was the easiest structure to understand as it uses very basic tax law in a clever way.
I do not yet have any clients in a scheme but have discussed with a couple of businesses about it and in detail with the providers, but not always suitable or appropriate.
I wouldnt use an "off the net" one or a totally overseas based one. Get a recommendation from someone or from a uk professional. Make sure the scheme is backed by barrister opinion (their reputation and insurance is then on the line!) and make sure the costs are reasonable. If through a uk accountant make sure you drag them into the decision as well they will be earning from it!
I would also recommend that all normal basic tax planning is done (ie get the company to pay into your pension/get them to pay some basic expenses/make sure you are getting paid the minimum wage etc as normal uk salary (will help with uk state penison as well) AND tuck some of the savings aside incase worse happens

WORSE CASE you should not be on your own if it is a professional company with UK backing so any winding up of the system should be controlled. If you use a foreign (rather than UK tax haven) they could just close and you try suing someone in Lux' ! There also shouldn't be penalties as the revenue has lost too many battles on this to justify you doing anything wrong.

The EBT (Employee Benefit Scheme) is used in many savings schemes and many of them are still being introduced to large companies by the big accounting practices for very wealthy people so why shouldn't the normal person get a chance sometimes!

Sorry to buck to forum trend James

[obelix]

Question on first post

iam a newbie...i'll start with a silly question.

the comparison stats on the first post does not include the personal tax liabilties...was wondering if the comparison would look more favourable to umbrella co. considering that the paye tax is considered before its paid to the contractor

[malvolio]

Hi - I know this discussion has probably gone back and forth, but I want to know whether anyone is using or has successfully used an EBT structure, I've heard that this is the most effective way to manage UK salary.

Sigh... Poor misguided fool....

[bigbrainbrad]

Ebt

Hi - I know this discussion has probably gone back and forth, but I want to know whether anyone is using or has successfully used an EBT structure, I've heard that this is the most effective way to manage UK salary.

[Maslins]

These offshore schemes are obviously appealing...but the risks involved are pretty huge.

Legislation is changing all the time, so it means you constantly need to keep yourself up to date on what's going on to ensure your scheme hasn't just been trumped. Sure, most of them are sufficiently clever in that they rely on the tax laws of the offshore company, and only "loan" money to you in the UK (HMRC are unlikely to be stupid enough to start taxing loans), but sooner or later they will be stopped.

Even if HMRC can't "get you" on the actual scheme itself, rest assured you will be a marked man/woman, and you'd better make sure you're absolutely squeaky clean elsewhere (taxwise...they don't care whether you wash or not).

You'll also typically find the scheme's fees involved are pretty huge (mainly because the provider knows its days are numbered...so even if it does work, they need to milk it now before it's stopped). Sure, the fees'll no doubt be less than the tax you're saving, but by how much, and is it worth it?

Far safer to "play friendly" and stay off the HMRC radar IMO.

[sal626]

I was in a loan scheme 05/07, which was similar to what Steed now offer.
It is not the same as the scheme offered by Montpellier which is what the BN66 thread is about.

There is a risk associated with these schemes, and its too early to say if they can be successfully defended or not. Saying that, I know of two schemes that are being queried (which is different to being investigated), and so far they have been successfully defended – by the scheme providers. In fact, the Special commissioner has twice ruled against HMRC on these, and in the second ruling, HMRC actually withdrew their appeal. The scheme providers are now actually chasing HMRC to close the query.

By joining one, it doesn’t mean you will 100% get done by the taxman, but it also doesn’t mean that you will never be queried/investigated. As of today, I am not aware of any EBT schemes that have been successfully challenged and closed (in the last couple of years). IMO, the govt will probably (have to) legislate to close these schemes soon…

[JPE]

Go and read the BN66 threads for an insight into just what can happen with these schemes. General opinion on the forum is that they are "Not A Good Thing".

Dave - thanks for the tip - it makes interesting reading. A friend has started using Steed Solutions and took advice from a tax consultant who advised him to go for it!! The scheme pays via "loans" which sounds dubious. Just wondered if anyone else uses this type of scheme?

[DaveB]

Hi Simon

Just wondered what your opinion was on IOM based companies like Steed Solutions? Pros and Cons?

Thanks

JPE

Go and read the BN66 threads for an insight into just what can happen with these schemes. General opinion on the forum is that they are "Not A Good Thing".

[JPE]

Steed Solutions

Hi Simon

Just wondered what your opinion was on IOM based companies like Steed Solutions? Pros and Cons?

Thanks

JPE