Agnency saying NO to umbrella and requiring LTD

[ukcontractor2007]

Hi Folks,

I have been offered a role for a bank as a PM via an agency based in London, however they are saying they can only keep the offer open if I have a Limited company and VAT no.

As a contractor for several years this is the first time I have seen this and its now happened twice in the month of August with another role I was offered by a different agency.

When I asked for an explanation as to why I could not use me umbrella I was told this is due to the end client (large banking group) not wanting any third party involved?

I like to sleep at night - and feel If I did setup a LTD company it will cost me a lot more in admin fees and might breach IR35. Although I was told all the contracts are IR35 friendly!

Has anyone else been put in this situation and is this now a growing trend?

Any thoughts?

Cheers.

[cojak]

Breach IR35?????

Everyone on here (including me) recommends using Ltd and NOT wasting money on umbrellas.

Use the Search button, my friend...

[centurian]

When I asked for an explanation as to why I could not use me umbrella I was told this is due to the end client (large banking group) not wanting any third party involved?

I like to sleep at night - and feel If I did setup a LTD company it will cost me a lot more in admin fees and might breach IR35. Although I was told all the contracts are IR35 friendly!

Has anyone else been put in this situation and is this now a growing trend?

IR35 is not a direct result of just having a Ltd company. It's concerned with the way you pay yourself from the LtdCo.

So if you're that worried about it, then pay yourself 95% PAYE, which means any IR35 investigation should last about as long as it takes to read this message.

With the 5% difference and VAT flat rate savings, this should easily cover the difference between accountancy costs and the umbrella fees. You should find yourself slighly better off than using an umbrella.

Not sure I believe the excuse about not wanting a 3rd party involved. Who do they think the agent and the Ltd Co are then

The only possible explanation I can offer is that HMRC's recently announced crackdown on umbrella expenses has got some ClientCo's spooked.

[pmeswani]

Hi Folks,

I have been offered a role for a bank as a PM via an agency based in London, however they are saying they can only keep the offer open if I have a Limited company and VAT no.

As a contractor for several years this is the first time I have seen this and its now happened twice in the month of August with another role I was offered by a different agency.

When I asked for an explanation as to why I could not use me umbrella I was told this is due to the end client (large banking group) not wanting any third party involved?

I like to sleep at night - and feel If I did setup a LTD company it will cost me a lot more in admin fees and might breach IR35. Although I was told all the contracts are IR35 friendly!

Has anyone else been put in this situation and is this now a growing trend?

Any thoughts?

Cheers.

You could always ask the agency why the Umbrella is considered to be a different type of employer to that of your own Limited Co. Having a Ltd co does not breach IR35, only the contents of the contract between the agency and Umbrella / Ltd Company.

[PhilAtBFCA]

ukcontractor2007

I dont think its fair to assume that a Limited Company costs more in adnin fees than an umbrella company. It would depend on how long you were running your own business for, you may well find that charges could be lower than an Umbrella Company.

As far as IR35 is concerned I dont know what you mean by breach ir35, but you may find this set of videos, they are quite short just a few minutes each, that explain Ir35 for you.

Phil

[watford]

Normally I find that agencies have their favourite lists of suppliers and this sometimes includes brollies ?

[abranei]

Hi

I am in the same situation. I was told that I cannot use my designated 3rd party company as its not on the PSL.

I have told the company I use to find out if legally agencies can force you to use a particular company.

Once I know more I will update.

[sweetandsour]

Hi Folks,

I have been offered a role for a bank as a PM via an agency based in London, however they are saying they can only keep the offer open if I have a Limited company and VAT no.

As a contractor for several years this is the first time I have seen this and its now happened twice in the month of August with another role I was offered by a different agency.

When I asked for an explanation as to why I could not use me umbrella I was told this is due to the end client (large banking group) not wanting any third party involved?

I like to sleep at night - and feel If I did setup a LTD company it will cost me a lot more in admin fees and might breach IR35. Although I was told all the contracts are IR35 friendly!

I would hope that you have resolved this by now but for what it is worth you are wrong about your Limited Company assumptions.

You would be advised to engage an accountant to assist you with the returns that have to be provided to Companies House and also to HM Revenue and Customs. For this an accountant will cost in the region of £1,000 to £1,500 per year, how does that stack up against the sums an umbrella company charges you?

There are many aspects to IR35 but in your case the important distinction to make is whether you are being paid to turn up and be told what to do (that makes you an employee, disguised or otherwise) or are you supplying services to meet a specific deliverable?

As a PM I think it would be easy to make the case that you are being contracted for a specific deliverable and therefore IR35 does not apply.


If you run a company then at some point you can expect to get an inspection of some sort, maybe for VAT or PAYE or your personal returns.

Some people purchase IR35 insurance because that helps them to sleep at night, others argue that it is probably unecessary.

For some people membership of the Professional Contractors Group provides them with backup in the event of HMRC taking an in-depth look at their business.

An accountant will be able to handle a VAT inspection but may not be so keen to challenge an IR35 decision so it is best to have troops that you can call on in such an event.

Up to you entirely which way you go, but do make sure that you would not be handling an HMRC inspection on your own and then you can sleep soundly at night.

[centurian]

For this an accountant will cost in the region of £1,000 to £1,500 per year, how does that stack up against the sums an umbrella company charges you?

I think most umbrella's are about £700 - 900 pa. which seems a lot cheaper.

However, with a Ltd, you often gain at least 1K on flat rate scheme. 5% can be allocated for expenses with any remainder taken as dividend.

So even operating IR35 under a Ltd is still marginally better off.

[centurian]

I am in the same situation. I was told that I cannot use my designated 3rd party company as its not on the PSL.

That's increasingly common. With the MSC legislation, there is increased onus on agents to ensure that the umbrella's used are 'legit', otherwise HMRC can go after the agent.

So they check out a few umbrella's and compose a PSL.

Doesn't sound like the same situation though. What the original poster is saying is that the client/agency would not accept any umbrella at all.

I have told the company I use to find out if legally agencies can force you to use a particular company.

It's a business to business transaction, so the agency can deal with whoever they like. To flip it around, why should they be forced to deal with a business. Don't think you have a leg to stand on there.