Reply to: Advantage of Umbrella over working Direct?

[zippy.mini]

Think Lisa had mentioned before, that you should most certainly have been given two rates, but if they thought you were going ltd or via a brollie then it is one rate for both, and so might have felt they didn't have to tell you both.

giving you the same rate for PAYE and Ltd would mean you paying Employers NI twice really.

They initially sent me the contracts for signing up and going direct through the Agency... I had to ask for the Umbrella forms instead... I suspect they messed up, as I just spoke to the lady who sorted my contract (but didn't send the actual contract forms cos she was on holiday) and she is convinced I would be worse off going PAYE through them. Nobody on my rate of pay goes direct apparently. She did say she'd check up and send me some figures though, so I guess we'll see.

[moggy]

I thought so too, but then I read this on Contractor Umbrella:

"You may be offered two different rates, one to be paid directly through the company’s payroll and another, higher rate, to have your pay processed through an Umbrella Company. The lower rate will apply if you opt to be paid directly by the company because they themselves will be liable for the Employer’s NIC. The higher rate is offered if you are being paid through an Umbrella Company because they are liable to pay the contribution. Provided the difference between the two rates is greater than 13.8%, you will be better off through an Umbrella Company because there are certain business expenses that you may be entitled to claim."

I have not been offered 2 rates, the rate I get is the same regardless as far as I can tell....

Think Lisa had mentioned before, that you should most certainly have been given two rates, but if they thought you were going ltd or via a brollie then it is one rate for both, and so might have felt they didn't have to tell you both.

giving you the same rate for PAYE and Ltd would mean you paying Employers NI twice really.

[zippy.mini]

If I assume that the rates are the same all things being considered paye to ltd with the ni and holiday factors, working via a brolly with no expenses compared to using paye - the difference would only be the brollies fee, so you would be marginally better off with paye through the agency.

I thought so too, but then I read this on Contractor Umbrella:

"You may be offered two different rates, one to be paid directly through the company’s payroll and another, higher rate, to have your pay processed through an Umbrella Company. The lower rate will apply if you opt to be paid directly by the company because they themselves will be liable for the Employer’s NIC. The higher rate is offered if you are being paid through an Umbrella Company because they are liable to pay the contribution. Provided the difference between the two rates is greater than 13.8%, you will be better off through an Umbrella Company because there are certain business expenses that you may be entitled to claim."

I have not been offered 2 rates, the rate I get is the same regardless as far as I can tell....

[moggy]

If I assume that the rates are the same all things being considered paye to ltd with the ni and holiday factors, working via a brolly with no expenses compared to using paye - the difference would only be the brollies fee, so you would be marginally better off with paye through the agency.

[zippy.mini]

Thanks for your replies so far..

Now, I've just had a bit of an epiphany that I wanted to run by you...

If I were to work direct through the agency, would they pay the Employers NI for me?

As far as I can see, having done some sums looking at take home pay with no expenses vs my current expense levels, the amount I'm being charged for ENI is actually more... I take home approx £100 a week more with expenses, but I get charged £150+ for ENI AND I pay the UC £28.50...

Am I right in thinking that as there is no extra pay from the Agency because I'm going through an Umbrella, I would actually be better off going direct and not bothering to claim expenses?

[LisaContractorUmbrella]

Thanks Lisa. Is that the case even if I'm there less than 40% of my time? The rest is working from home?

Yes, it would still apply

[zippy.mini]

You are correct - in order to be able to claim travel and subsistence you must be travelling to a temporary workplace; if you know that you will only be working on one assignment whilst in your employment with the umbrella company it would, by default, become a permanent workplace

Thanks Lisa. Is that the case even if I'm there less than 40% of my time? The rest is working from home?

[LisaContractorUmbrella]

Thanks Lisa, that's interesting. Agency originally sent me a contract for working direct through them. I told them I would be using an umbrella. They sent me a different form, but didn't mention anything about rate change. I suspect the rate is what it is, I wouldn't expect them to offer more if I was going through a Ltd... I can always ask though!

If you happen to know the answer to my question in my previous reply re travel and subsistence expenses, your help would be gratefully received!

You are correct - in order to be able to claim travel and subsistence you must be travelling to a temporary workplace; if you know that you will only be working on one assignment whilst in your employment with the umbrella company it would, by default, become a permanent workplace

[LisaContractorUmbrella]

Just so 'No!' to brollies.

BB It's been so long

[BolshieBastard]

Hi
Can someone explain to me why I would use an Umbrella Company rather than work direct through the Agency?

I hadn't realised working direct was an option until I just read the contract they sent me - they appear to be assuming I will be working direct even though I said I was going to use an Umbrella....

Thanks

Just so 'No!' to brollies.

[zippy.mini]

If the agency are offering to pay the same rate direct as they will through an umbrella company you would be no better off but usually the rate is higher as the umbrella company takes on the employer responsibilities

Thanks Lisa, that's interesting. Agency originally sent me a contract for working direct through them. I told them I would be using an umbrella. They sent me a different form, but didn't mention anything about rate change. I suspect the rate is what it is, I wouldn't expect them to offer more if I was going through a Ltd... I can always ask though!

If you happen to know the answer to my question in my previous reply re travel and subsistence expenses, your help would be gratefully received!

[zippy.mini]

Oh right, he's a temp, not a contractor at all.

Then no wonder I was confused, that didn't occur to me.

I WAS a contractor using my own Limited Company. Was going to retire and decided to put my co into MVL 3 months ago. Now a previous client has offered me a contract I cannot turn down (I wasn't looking for work) and I'm trying to work out the best way to go about it.
I'm not sure if opening another company to do the same thing as the old one, whilst the old one is still going through liquidation, will affect my ability to use Entrepreneur's Relief to get that money out. My accountant thinks I'd have a good argument because I hadn't been offered the contract when I put the co into liquidation, but it's a risk. I'm not big on risk, therefore I think it might be easier just for this one contract, to go PAYE, even though I think it would be an outside IR35 contract.
Never having looked into this before, I assumed I had to use an umbrella co, I never realised the Agency could pay me directly. I had thought the advantage of an Umbrella Co would be that it allows me to claim travel expenses but apparently if I'm only going to do the one contract through them, then I can't claim them anyway as it won't be classed as a temporary work place. This is apparently the same if I open a Ltd to work just this one contract. If anyone can tell me if this is true even if I spend on average only 2 days or less a week there (so less than 40% of my time), I would be grateful.

[cojak]

Or he's working as a PAYE temp through the agency... which I think may have been the original question.

Oh right, he's a temp, not a contractor at all.

Then no wonder I was confused, that didn't occur to me.

[malvolio]

And be careful with your terminology - what do you mean by 'work direct through the Agency'?

To us 'Working direct' means your Ltd company invoicing the Client, therefore being a vendor to the Client. Otherwise you work through the agency (with your Ltd invoicing the agency) and the agency is the vendor to the Client, supplying your services.

You as a person do not invoice the agent or the client as the onus is then on them to make sure that you have paid your NI and taxes, and they don't like that idea.

Or he's working as a PAYE temp through the agency... which I think may have been the original question.

[cojak]

And be careful with your terminology - what do you mean by 'work direct through the Agency'?

To us 'Working direct' means your Ltd company invoicing the Client, therefore being a vendor to the Client. Otherwise you work through the agency (with your Ltd invoicing the agency) and the agency is the vendor to the Client, supplying your services.

You as a person do not invoice the agent or the client as the onus is then on them to make sure that you have paid your NI and taxes, and they don't like that idea.