Originally posted by smeg35
View Post
- Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
- Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!
Up to 90%
Collapse
X
Collapse
-
-
Originally posted by SlipTheJab View PostTBH 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 timeComment
-
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 umbrellasComment
-
Originally posted by smeg35 View PostBut 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
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."Being nice costs nothing and sometimes gets you extra bacon" - Pondlife.Comment
-
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.Comment
-
Originally posted by Moony View PostI 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."I can put any old tat in my sig, put quotes around it and attribute to someone of whom I've heard, to make it sound true."
- Voltaire/Benjamin Franklin/Anne Frank...Comment
-
Originally posted by Moony View PostI 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.Comment
-
Originally posted by Moony View PostI 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.Comment
-
Originally posted by LisaContractorUmbrella View PostSo, 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
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.
Last edited by Moony; 20 October 2015, 09:49.Comment
-
Originally posted by Moony View PostDoesn'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.
Comment
- Home
- News & Features
- First Timers
- IR35 / S660 / BN66
- Employee Benefit Trusts
- Agency Workers Regulations
- MSC Legislation
- Limited Companies
- Dividends
- Umbrella Company
- VAT / Flat Rate VAT
- Job News & Guides
- Money News & Guides
- Guide to Contracts
- Successful Contracting
- Contracting Overseas
- Contractor Calculators
- MVL
- Contractor Expenses
Advertisers
Contractor Services
CUK News
- Streamline Your Retirement with iSIPP: A Solution for Contractor Pensions Sep 1 09:13
- Making the most of pension lump sums: overview for contractors Sep 1 08:36
- Umbrella company tribunal cases are opening up; are your wages subject to unlawful deductions, too? Aug 31 08:38
- Contractors, relabelling 'labour' as 'services' to appear 'fully contracted out' won't dupe IR35 inspectors Aug 31 08:30
- How often does HMRC check tax returns? Aug 30 08:27
- Work-life balance as an IT contractor: 5 top tips from a tech recruiter Aug 30 08:20
- Autumn Statement 2023 tipped to prioritise mental health, in a boost for UK workplaces Aug 29 08:33
- Final reminder for contractors to respond to the umbrella consultation (closing today) Aug 29 08:09
- Top 5 most in demand cyber security contract roles Aug 25 08:38
- Changes to the right to request flexible working are incoming, but how will contractors be affected? Aug 24 08:25
Comment