Offshore Umbrella Co

[LisaContractorUmbrella]

To the OP.

Don't sell out for less than 90% in the hand. The extra 5% isn't going to insurance or anything else it is pure profit for the umbrella.

Geoff / Vallah -
what is the wage/salary component of your scheme?
How much is your cut?
How much tax is actually being paid so your customers can work out their liability should it all go tits up and HMRC rule the whole lot as PAYE income.

Thanks.

They won't answer

[LisaContractorUmbrella]

To the OP.

Don't sell out for less than 90% in the hand. The extra 5% isn't going to insurance or anything else it is pure profit for the umbrella.

Geoff / Vallah -
what is the wage/salary component of your scheme?
How much is your cut?
How much tax is actually being paid so your customers can work out their liability should it all go tits up and HMRC rule the whole lot as PAYE income.

Thanks.

They won't answer

[prozak]

They won't answer

we can only hope...

I'll answer for them then based on a previous EBT.

So they pay the contractor about 13068 a year or thereabouts.
On this total taxes are : £2646.05 (Tax: 1117.8, NI 700.8, Emp NI 827.45)

So if you are earning 100k a year contracting. That tax amount is 2.6%... saweet... but hold on... that means the offshore dudes are taking a cool 12.4% (based on 85%) for themselves to cover costs and make some profits.

Your total tax liability for 100k if through paye is : £48213.5

So if HMRC do you over you will owe them a nice little sum of £45567.45

Of course its only an if..... and what you took home was of course £85,000 (85%). But if HMRC whack you over the head your real take home has turned into £39432.55 (i.e. 85k less what HMRC want, because it is your liability)
Which the clever folks amongst you will realise is 11k less than if you went pure PAYE and avoided this whole thing in the first place.

All I'm saying is buyer beware. You may still decide to go ahead. Just understand the risks.

ps. I reserve the right to edit my figures as I or others find errors! haha.

Edit #1 : I should also add that trusts don't do things for free. at least £15 every time you request a loan. Plus yearly bank charges, plus other charges for example if you have to sign a different loan agreement and then when you leave the scheme the trust keeps going and charging you for stuff for the next 50 years. Not a major amount but it is still there and not covered by the initial 12.4% take.

Edit #2 : then when in a few years time when HMRC close this one down with legislation and immediate effects like they did with EBT's ... you better not get caught with any money in the trust! You will have to take that as paye. The trust wont break rules for you to wriggle out of that one.

[geoff from contracta IOM]

To the OP.

Don't sell out for less than 90% in the hand. The extra 5% isn't going to insurance or anything else it is pure profit for the umbrella.

Geoff / Vallah -
what is the wage/salary component of your scheme?
How much is your cut?
How much tax is actually being paid so your customers can work out their liability should it all go tits up and HMRC rule the whole lot as PAYE income.

Thanks.

Allow me to answer - sorry to disappoint Lisa

The self employed earnings which are income are typically between 20 - 40 K PA depending on the skills of the consultant.
The total fees are 12% split between all parties involved
The actual tax liability is determined by the individuals earnings , operating expenses, accountants fees the same as any self employed individual. We provide illustrations to provide a guide as to how much tax and NI can be expected but it can only be calculated upon completion of the SA return when all factors are considered.

[geoff from contracta IOM]

we can only hope...

I'll answer for them then based on a previous EBT.

So they pay the contractor about 13068 a year or thereabouts.
On this total taxes are : £2646.05 (Tax: 1117.8, NI 700.8, Emp NI 827.45)

So if you are earning 100k a year contracting. That tax amount is 2.6%... saweet... but hold on... that means the offshore dudes are taking a cool 12.4% (based on 85%) for themselves to cover costs and make some profits.

Your total tax liability for 100k if through paye is : £48213.5

So if HMRC do you over you will owe them a nice little sum of £45567.45

Of course its only an if..... and what you took home was of course £85,000 (85%). But if HMRC whack you over the head your real take home has turned into £39432.55 (i.e. 85k less what HMRC want, because it is your liability)
Which the clever folks amongst you will realise is 11k less than if you went pure PAYE and avoided this whole thing in the first place.

All I'm saying is buyer beware. You may still decide to go ahead. Just understand the risks.

ps. I reserve the right to edit my figures as I or others find errors! haha.

Edit #1 : I should also add that trusts don't do things for free. at least £15 every time you request a loan. Plus yearly bank charges, plus other charges for example if you have to sign a different loan agreement and then when you leave the scheme the trust keeps going and charging you for stuff for the next 50 years. Not a major amount but it is still there and not covered by the initial 12.4% take.

Edit #2 : then when in a few years time when HMRC close this one down with legislation and immediate effects like they did with EBT's ... you better not get caught with any money in the trust! You will have to take that as paye. The trust wont break rules for you to wriggle out of that one.

Re. Edit #1 : As the scheme providers we are responsible for remunerating the trustees and under the trust deed they cannot take funds from the trust to cover their expenses

Re. Edit #2 : Post EBT there were a number of methods devised to extract funds still trapped in the trusts that did not require full PAYE.

[prozak]

Re. Edit #1 : As the scheme providers we are responsible for remunerating the trustees and under the trust deed they cannot take funds from the trust to cover their expenses

Re. Edit #2 : Post EBT there were a number of methods devised to extract funds still trapped in the trusts that did not require full PAYE.

Edit #1 - so there are no bank charges from the trust? Are you sure about that? What if a loan has to be re-written? What if I want to close the loan when I become non uk resident?

Edit #2 - yes. some had the trust give gold to the beneficiary. Additional transaction charges were of course incurred as this was outside the remit of the original trust arrangements. there were also disposal charges for the beneficiary when selling the gold as well as the associated risk with holding a commodity.

As I said before. I am not advocating a choice either way. But your customers need to do their due diligence.

I must also add... i think your cut is too high and I would recommend anyone interested in taking a punt on one of these schemes to shop around and get as good a return as you can because the risk is all theirs.

[LisaContractorUmbrella]

Allow me to answer - sorry to disappoint Lisa

The self employed earnings which are income are typically between 20 - 40 K PA depending on the skills of the consultant.
The total fees are 12% split between all parties involved
The actual tax liability is determined by the individuals earnings , operating expenses, accountants fees the same as any self employed individual. We provide illustrations to provide a guide as to how much tax and NI can be expected but it can only be calculated upon completion of the SA return when all factors are considered.

12% in fees Boy am I in the wrong game! So for a £1000 per day contractor on a 6 month contract you would take almost £15,000 in fees And it's always a percentage? So the more you earn the more you pay?? I wondered what Gordon Brown did when he moved out of politics!

[geoff from contracta IOM]

Edit #1 - so there are no bank charges from the trust? Are you sure about that? What if a loan has to be re-written? What if I want to close the loan when I become non uk resident?

Edit #2 - yes. some had the trust give gold to the beneficiary. Additional transaction charges were of course incurred as this was outside the remit of the original trust arrangements. there were also disposal charges for the beneficiary when selling the gold as well as the associated risk with holding a commodity.

As I said before. I am not advocating a choice either way. But your customers need to do their due diligence.

I must also add... i think your cut is too high and I would recommend anyone interested in taking a punt on one of these schemes to shop around and get as good a return as you can because the risk is all theirs.

To be honest I don't think finding the cheapest provider is necessarily the best way to approach it

[geoff from contracta IOM]

12% in fees Boy am I in the wrong game! So for a £1000 per day contractor on a 6 month contract you would take almost £15,000 in fees And it's always a percentage? So the more you earn the more you pay?? I wondered what Gordon Brown did when he moved out of politics!

I think you do OK too Lisa

[prozak]

To be honest I don't think finding the cheapest provider is necessarily the best way to approach it

You all have the same offerings. It's not that innovative. In fact they are all so similar I wouldn't be surprised to find out that you all work in the same office. So I do.

Unless you are guaranteeing through an insurance policy that you will cover all HMRC investigations and extra payments then I don't see your value add. 7% should be more than enough of a cut. You don't need to attract many 500 a day contractors to start making big money.

I am definitely in the wrong business.