Up to 90%

[flamel]

Lol... Point taken

But if they were using one if these schemes and received an APN id be more likely to say 'you reap what you sow'

[LisaContractorUmbrella]

TBH As a newbie its easy to get caught. My first contract (around 5 years ago) I almost ended up in one via a refererral. Luckily the agency wouldn't deal with the 'Umbrella' (I use that term loosely as I now know it was far from a standard brolly setup) that the firm we're using and I went Ltd. It's only after reading about these schemes on here that I realise what a lucky escape I had. As for it still going on... the last place I was at a Kiwi contractor was bragging about using some New Zealand based outfit that meant he was paying less than 1% tax in the UK, this despite working and living in London full time

Therein lies part of the problem - there are many scheme providers who are referring to themselves as umbrella companies when they are in fact promoting tax avoidance schemes

[smeg35]

But are most of these schemes tax evasion rather than avoidance as little to no real tax is ever paid. Percentage wise the firm appears to get more from the contractor than the HMRC. That is just plain wrong.

And for a newbie like me I thought all umbrellas behaved this way, so I can definitely sympathise with you Lisa as it does appear to cast a dark shadow over real umbrellas

[DaveB]

But are most of these schemes tax evasion rather than avoidance as little to no real tax is ever paid. Percentage wise the firm appears to get more from the contractor than the HMRC. That is just plain wrong.

And for a newbie like me I thought all umbrellas behaved this way, so I can definitely sympathise with you Lisa as it does appear to cast a dark shadow over real umbrellas

It's only Evasion if it's a deliberate non payment of tax that is legitimately due.

The scheme providers take advantage of ambiguities and loopholes in the law to interpret it in such a way that they can claim tax is not due. When HMRC challenge them the courts or tax tribunal will determine whether the interpretation of the law was correct or not. If it proves to have been incorrect then the scheme is deemed not to work and any unpaid tax that would have otherwaise been paid becomes due.

Provided there is no evidence that the scheme provider or users knew it was incorrect it wont be classed as Evaision.

However it is the scheme users responsibility to settle any resulting tax bill, not the provider and they have a track record, with some notable exceptions, of disappearing into the night with their fees as soon as HMRC come calling.

[Moony]

I have heard a few contractors talk about these scheme. They claimed to be getting around 87-90% of their invoiced amount per month.

The way it has been described to me is that you are essentially given a 'loan' from the umbrella company - but it never gets paid back, because both the umbrella and the contractor have to agree to pay it back

No idea as to the legalities - but it sounds dodgy as hell.

[cojak]

I have heard a few contractors talk about these scheme. They claimed to be getting around 87-90% of their invoiced amount per month.

The way it has been described to me is that you are essentially given a 'loan' from the umbrella company - but it never gets paid back, because both the umbrella and the contractor have to agree to pay it back

No idea as to the legalities - but it sounds dodgy as hell.

<CUK points and laughs...>

[TykeMerc]

I have heard a few contractors talk about these scheme. They claimed to be getting around 87-90% of their invoiced amount per month.

The way it has been described to me is that you are essentially given a 'loan' from the umbrella company - but it never gets paid back, because both the umbrella and the contractor have to agree to pay it back

No idea as to the legalities - but it sounds dodgy as hell.

Here's hoping that HMRC catches up to them, bends them over, doesn't bother with lube and arranges a 5+ year long abuse session. Anyone stupid enough to be using a scheme now or in the recent past (post 2007/8) really should have done some due diligence.

[LisaContractorUmbrella]

I have heard a few contractors talk about these scheme. They claimed to be getting around 87-90% of their invoiced amount per month.

The way it has been described to me is that you are essentially given a 'loan' from the umbrella company - but it never gets paid back, because both the umbrella and the contractor have to agree to pay it back

No idea as to the legalities - but it sounds dodgy as hell.

So, you have earned money - someone takes it away from you and then gives it back to you as a 'loan' which you'll never have to repay - that's not dodgy at all is it

[Moony]

So, you have earned money - someone takes it away from you and then gives it back to you as a 'loan' which you'll never have to repay - that's not dodgy at all is it

Doesn't quite work like that. The way it has been explained to me is this:

You are effectively employed by the umbrella company. You submit a timesheet to them - who in turn submit an invoice + VAT to the company you are actually doing the work for.

One the invoice is paid - the umbrella company then pay you your salary + a loan which equates to around 90% the invoiced amount minus VAT.

So for example - you worked 40 hours a week for 4 weeks at an agreed rate of £50 per hour. The umbrella would submit an invoice to the value of 40*4*£50 + VAT = £9600 to the company you did the work for.

You would then be paid 90% of the invoice amount minus the VAT - so 40*4*£50/100 * 90% = £7200 and have no income tax, NI, corporation tax or VAT liability as the umbrella has (supposedly) dealt with all of this.

[LisaContractorUmbrella]

Doesn't quite work like that. The way it has been explained to me is this:

You are effectively employed by the umbrella company. You submit a timesheet to them - who in turn submit an invoice + VAT to the company you are actually doing the work for.

One the invoice is paid - the umbrella company then pay you your salary + a loan which equates to around 90% the invoiced amount minus VAT.

So for example - you worked 40 hours a week for 4 weeks at an agreed rate of £50 per hour. The umbrella would submit an invoice to the value of 40*4*£50 + VAT = £9600 to the company you did the work for.

You would then be paid 90% of the invoice amount minus the VAT - so 40*4*£50/100 * 90% = £7200 and have no income tax, NI, corporation tax or VAT liability as the umbrella has (supposedly) dealt with all of this.

OK, so basic income tax is 20%, employee's NIC's are 12% (up to a threshold then 2%), employer's NIC's are 13.8%, VAT is 20% and corporation tax is 20%. The scheme provider will take a fee - usually around 5-10%. Even Albert Einstein would struggle to work out a 90% take home from that lot