Accountant advised me to go Umbrella ?!?!

[malvolio]

Ermm...

An accountant charges you an annual fee split over 12 months. It's a year's work and you wouldn't get any cheaper for working only a half year. Also, it's a lot easier to get a consistent income from a Ltd Co than from your personal savings, which is what you get from an umbrella. And I expect the extra 15% net income might come in handy when the market dries up as well.

So your call, but are you really sure you've thought this through fully?

[Benny Boy]

It's all I think about at the mo

This particular contract is inside IR35 so after six months (assuming it won't be extended), I'll take some time off (assuming my ever changing plan goes ahead).
I guess it's a choice of paying an Umbrella 6 months or paying accountant 12 months for this particual piece of work (the accountant will treat me as a "normal" PAYE inside IR35).

Still a good idea to use Umbrella ?

[malvolio]

It's all I think about at the mo

This particular contract is inside IR35 so after six months (assuming it won't be extended), I'll take some time off (assuming my ever changing plan goes ahead).
I guess it's a choice of paying an Umbrella 6 months or paying accountant 12 months for this particual piece of work (the accountant will treat me as a "normal" PAYE inside IR35).

Still a good idea to use Umbrella ?

We'll ignore the detail that most "caught" IR35 contracts probably aren't. After all, unless the client is telling you precisely what to do and when, that you get paid when there is no work to be done, that you can't refuse to do work that isn't in your contract schedule and you are not allowed to offer a substitute under any circumstances.... That's what matters, nothing else.

What's the difference between umbrella fees adn accountant fees? With an umbrella you pay full PAYE and NICs on 100% of your income, with YourOwnCo you pay it on 95%. Ignore expenses, they are the same either way.

It's all sums. I don't know your numbers.

[NotAllThere]

If you work six months for one umbrella company and then work another brolly, then you will not be able to claim travel and subsistence expenses, as each position will be considered by HMRC to be a permanent place of work - different employers, different workplaces.

The six month break between contracts might also have this affect.

With a ltdco, you'd remain the employee, so "same employer, different workplace" = temporary workplace = claimable expenses.

Further, and this is the really important point from my perspective, with ltd co, YOU are in control of YOUR money. If you have a brolly, the brolly is in control of your money. If you have difficulty getting paid, for example, the brolly has little or no financial incentive to dun on your behalf.

As far as accountancy is concerned, you could find one to do the work for you on a piece by piece basis, rather than yearly charge spread over 12 months. It'd probably overall cost the same.

.... Ignore expenses, they are the same either way.

Really? Try buying a new laptop through a brolly.

[malvolio]

Really? Try buying a new laptop through a brolly.

Why is that a problem? It's a personal purchase if you're through a brolly.

The whole brolly exenses thing is a bit of sleight of hand anyway, in reality, albeit one that makes perfect sense commercially. But if you don't have a business, how can you have business expenses?

[LisaContractorUmbrella]

It's all I think about at the mo

This particular contract is inside IR35 so after six months (assuming it won't be extended), I'll take some time off (assuming my ever changing plan goes ahead).
I guess it's a choice of paying an Umbrella 6 months or paying accountant 12 months for this particual piece of work (the accountant will treat me as a "normal" PAYE inside IR35).

Still a good idea to use Umbrella ?

Having read the other threads that you have posted on here IMHO it is a very good idea for you to work with an umbrella company for a few months until you fully understand what is involved in being a contractor - there is a lot to learn and you can get in a right muddle if you get it wrong

[IR35 Avoider]

I treat myself as IR35-caught, but it still makes a lot of sense to have my own company.

Three years ago I did briefly use an umbrella, but was only doing a handful of days here and there, and found the umbrella was worse from a tax point of view due to the way NI is calculated. This is admittedly an unusual situation.

I calculated that I would only have to work 40 days before running a company would be cheaper than using an umbrella. My online accountant charges less per year than an umbrella would, and their fee is more than offset by profit I make on flat-rate VAT. In slightly less than two years of invoicing I've clocked up over £5000 bonus income from flat rate VAT, and my accountant is well under £1000 a year.

[NotAllThere]

Why is that a problem? It's a personal purchase if you're through a brolly. ...

OK, for an IR35 contract, not an issue (unless your 5% is big). But for non-IR35, being unable to make business purchases definitely reduces income.

[ASB]

Why is that a problem? It's a personal purchase if you're through a brolly.

Even so, if you can demonstrate wholly etc then the expense can still be claimed (same as any other) through your tax return.

[Wanderer]

Anyhow, had a meeting with my account and he advised that if I wanted to continue the contract inside IR35, then there's very little benefit using a Ltd Co and to go the Umbrella route. The Umbrella will obviously charge for their service which I guess is comparable to account fee's, insurance, etc.

Despite what the big boys here say, Umbrellas aren't all evil and your manhood won't shrivel up and drop off if you use one - lots of contractors use them because they are an easy solution and you won't lose any sleep worrying about being visited by the tax man. If you are at all worried about the admin and tax position of running a LTD company then just go with the umbrella. Choose the quiet life, get on with your career and take the money at the end of the day.

Once you see your P60 from the umbrella and find out how much tax you paid, you may want to reconsider the LTD company route or if you may be happy to stick with the convenience of the umbrella. It's up to you.