Choosing an Umbrella company - Benefits in kind approach. Good or bad?

[zilla88]

Hey all,

First time poster so apologies in advance if I accidentally break any rules.

I am taking on my first inside IR35 contract in a couple of weeks. As a result I need to chose an umbrella company to go through. I know that there are a lot of 'dodgy' umbrella companies out there so I want to make sure that the solution I chose is within the law.

I know that the safest option is to go through an umbrella company that will process all payments through PAYE, however I am getting confused about whether any of the other options out there are also within the law or not. It clear that some options like growth shares option is not compliant and I know to stay clear of those.

My question is whether the users of this forum have come across umbrella companies which are using 'benefits in kind' approach to give a larger take home pay and stay compliant. In this approach the Umbrella company would pay me a small salary and take all taxes and NI payments from the gross figure based on the salary they are paying (sounds okay so far) and then pay the rest of my take home pay by paying me through the benefits in kind mechanism (starting to sound dodgy). All the benefits in kind payments would be taxed (at a different to income tax and NI rate) and declared to HMRC through the P11D form (sounds okayish as it is being declared).

Has anyone else seem this approach before and what your thoughts on its viability?

Also, I'm aware that some users would say that I'm just being a 'greedy contractor' but there is nothing wrong in using the system to gain as much as you can as long as you stay within the law. - this is my goal and intention.

Thank you all in advance for your feedback and guidance.

[NotAllThere]

Expenses claimed have to be expenses incurred - with receipts. Do not go with any brolly that suggests you can claim artificially high expenses or a blanket amount.

[cojak]

If I was an agency I wouldn’t have that kind of umbrella on my PSL so it’s something of a moot point.

Definitely barge pole territory.

[zilla88]

Expenses claimed have to be expenses incurred - with receipts. Do not go with any brolly that suggests you can claim artificially high expenses or a blanket amount.

thanks. This is what I'm thinking as well. I need to keep reminding myself to not get enticed by these larger take home numbers.

When it comes to the umbrella companies that offer the traditional option of all payments are made through PAYE then is the only differentiation between these companies the rate that they charge me or is there also something else that I should take note of when trying to find the best take home pay within the PAYE model?

[northernladuk]

My question is whether the users of this forum have come across umbrella companies which are using 'benefits in kind' approach to give a larger take home pay and stay compliant. In this approach the Umbrella company would pay me a small salary and take all taxes and NI payments from the gross figure based on the salary they are paying (sounds okay so far) and then pay the rest of my take home pay by paying me through the benefits in kind mechanism (starting to sound dodgy). All the benefits in kind payments would be taxed (at a different to income tax and NI rate) and declared to HMRC through the P11D form (sounds okayish as it is being declared).

Has anyone else seem this approach before and what your thoughts on its viability?

Also, I'm aware that some users would say that I'm just being a 'greedy contractor' but there is nothing wrong in using the system to gain as much as you can as long as you stay within the law. - this is my goal and intention.

Thank you all in advance for your feedback and guidance.

So you want to use a scheme but you don't want to use a scheme. Yes you are being greedy. You are making half an attempt to avoid known schemes but it's people like you that will feed the next round of schemes that pop up. Next one says we don't do loans, we do Benifit in Kind. Would you sign up?

Get one that does PAYE and that's that. There are people out there much clever than you who can invent and game systems so don't try it. Pick a recommended umbrella that does PAYE and get on with it.

FYI I'd recommend Lucy at Clarity Umbrella. I've been on her books and worked well for me. She's also a regular poster on here so knows her stuff and is nothing to do with whatever scheme you can think of.

[zilla88]

If I was an agency I wouldn’t have that kind of umbrella on my PSL so it’s something of a moot point.

Definitely barge pole territory.

Thanks for the reply. I didn't even think about what my agency would accept or not. Very good point.

I have the same follow up question that I asked @notallthere, when choosing the umbrella company based on the PAYE model, which I think is really the only option that that I should for in umbrella companies. Other than the rate that they will charge me, is there any other factor that I should look at when deciding which company can offer me the best option?

Thanks for your advise so far

[eek]

Go for it.

For a few £k extra now you can look forward to a complete world of pain when HMRC come knocking and asking for the appropriate tax followed (a few months / years later) by a company liquidator seeking the "loaned" money back.

Expressed like that I hope you can see how stupid the idea actually is as

1) you are responsible for paying the tax you earn and HMRC will use the agency payment to calculate how much tax you owe (it's reported to HMRC by your agency every month)
2) while the agency and HMRC will regard the money as income the "umbrella" will rightfully see anything that they don't pay out directly as income as a loan to you which they can seek repayment of.

Basically if it looks too good to be true - it is...

Just keep things simple and use an umbrella that operates full PAYE on the payments it makes.

[zilla88]

So you want to use a scheme but you don't want to use a scheme. Yes you are being greedy. You are making half an attempt to avoid known schemes but it's people like you that will feed the next round of schemes that pop up. Next one says we don't do loans, we do Benifit in Kind. Would you sign up?

Get one that does PAYE and that's that. There are people out there much clever than you who can invent and game systems so don't try it. Pick a recommended umbrella that does PAYE and get on with it.

FYI I'd recommend Lucy at Clarity Umbrella. I've been on her books and worked well for me. She's also a regular poster on here so knows her stuff and is nothing to do with whatever scheme you can think of.

Thanks for the reply and recommendation. Would you mind giving me other recommendations so that I can compare or point me to another post if that already exists?

I'm getting a bit off topic but would like to reply to your comment below:

Yes you are being greedy. You are making half an attempt to avoid known schemes but it's people like you that will feed the next round of schemes that pop up. Next one says we don't do loans, we do Benifit in Kind. Would you sign up?

You are making the assumption that I am willing to go with an option that is against the law when I clearly stated that I am only looking for an option that is within the law. This whole post has been about me asking for help to understand whether the 'benefit in kind' option is within the law or not. Re. the greedy comment, have you ever contracted through your own Ltd company and taken out dividends instead of making sure all of your pay was subject to income and NI? If you have then that is within the law but also the same as a 'benefits in kind' type of option if benefits in kind' was a legal option. Would that also make you greedy?

[zilla88]

Go for it.

For a few £k extra now you can look forward to a complete world of pain when HMRC come knocking and asking for the appropriate tax followed (a few months / years later) by a company liquidator seeking the "loaned" money back.

Expressed like that I hope you can see how stupid the idea actually is as

1) you are responsible for paying the tax you earn and HMRC will use the agency payment to calculate how much tax you owe (it's reported to HMRC by your agency every month)
2) while the agency and HMRC will regard the money as income the "umbrella" will rightfully see anything that they don't pay out directly as income as a loan to you which they can seek repayment of.

Basically if it looks too good to be true - it is...

Just keep things simple and use an umbrella that operates full PAYE on the payments it makes.

Okay. thank you for the reply. I think its clear from you reply and the others so far that the benefits in kind option is not one to take. I've asked others the same following questions, but when choosing a PAYE based umbrella company then other than the rate that they charge me what other differential factors should I be aware of when determining the take home pay, or is the rate that the umbrella company will charge me the only differential factor between the PAYE based umbrella companies?

[jamesbrown]

'greedy contractor'

Are you a greedy contractor, though? Or are you a dodgy umbrella company promoter?

Either way, no, this is obviously a stupid idea for the most hard-of-thinking contractors among us.

Use a legitimate PAYE umbrella or order lube, end of story.