Accountant advised me to go Umbrella ?!?!

**Benny Boy** · 28 July 2012, 12:55

P.S. I haven't signed the contract yet.

**northernladuk** · 28 July 2012, 12:57

Have you checked the Umbrella thread? There are two stickies in there titled 'Everything you need to know about Umbrellas' and 'Should I trade as Umbrella'. Reading both of those should answer some of your questions.

You could also look for the calculators on here to look at inside and outside income calcs and see if you can get the same for a brolly.

**captainham** · 28 July 2012, 14:22

Originally posted by Benny Boy View Post

Hi,

I recently had a contract reviewed which fell inside IR35. Was advised what changes could be made but there's still no guarantee as working conditions are not taken in to consideration of contract if reviewed.

I was under the impression that working practices were actually the most important part of IR35 compliance (or not, as the case may be), seeing as though a contract could be totally "IR35-friendly" but this will be disregarded if your actual working practices do not reflect the fact you are in business on your own account.

**SueEllen** · 28 July 2012, 16:11

Originally posted by Benny Boy View Post

Hi,

I recently had a contract reviewed which fell inside IR35. Was advised what changes could be made but there's still no guarantee as working conditions are not taken in to consideration of contract if reviewed.

Right to spoon feed you as newbie or not you should be able to do your own research.

As already said it's your working practises that are taken into account.

So you can have the best IR35 compliant contract in the world but if you are investigated and the client clearly indicates your working practises are inside, then you will fail.

On the other side if you have a contract that is vague, badly written or non-existent, but your working practises are clearly outside then the investigation will eventually be stopped.

There are two very recent threads about this. One is a guy working on a purchase order and another one whose substitution clause fails an IR35 review. (I suggest you search for these threads, read and digest them. )

Thirdly as a new contractor HMRC will generally leave you alone for at least 2 years as they haven't got anything i.e. accounts to go on. Just don't muck up your VAT returns.

Originally posted by Benny Boy View Post

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.

You need to get a new accountant.

I know some contractors who are inside IR35 due to their contract and working practises but still use their own limited company. You get to use 5% of your contract rate for expenses.

There is also nothing stopping you from having more than one contract at a time. So you can have a contract inside IR35 and another outside.

**Maslins** · 28 July 2012, 18:32

I can sympathise with the accountant here. There are some small tax benefits of trading via a Ltd Co if inside IR35 vs umbrella, but they're small.

If like you suggest you're new to all this, going via an umbrella is a lot less hassle for you. You get a payslip with your net pay each week/month, and that's all you need to worry about. Set up a Ltd Co and you take on a lot of responsibilities.

**Benny Boy** · 29 July 2012, 08:11

Being new to all of this... thanks for your advice - and apologies to those who're got a bit impatient.

The thing I can't seem to get my head around is that even if I get the changes made to the contract to fall outside IR35, there's still no guarantee that Mr HMRC will come knocking at my door and dispute it. In fact, any contract I take on will always be subjective and I'm not sure I want the constant worry. Maybe I'm focussing too much on the contract side of things?
Looking at this from new eyes, the IR35 is the most ridiculous way of governing this issue and I can see how people through no fault of their own, get in to a mess. Sorry for rant, sure you’ve heard it all before.

Anyway, I will not be taking my accountants advice of making this experience cost effective for me - instead, I intend to go the Umbrella route and get some experience of contracting and the whole shenanigans around it ;o)
Now what the hell do I do with the Ltd co I set up !!!

**Clare@InTouch** · 29 July 2012, 12:00

Originally posted by Benny Boy View Post

Being new to all of this... thanks for your advice - and apologies to those who're got a bit impatient.

The thing I can't seem to get my head around is that even if I get the changes made to the contract to fall outside IR35, there's still no guarantee that Mr HMRC will come knocking at my door and dispute it. In fact, any contract I take on will always be subjective and I'm not sure I want the constant worry. Maybe I'm focussing too much on the contract side of things?
Looking at this from new eyes, the IR35 is the most ridiculous way of governing this issue and I can see how people through no fault of their own, get in to a mess. Sorry for rant, sure you’ve heard it all before.

Anyway, I will not be taking my accountants advice of making this experience cost effective for me - instead, I intend to go the Umbrella route and get some experience of contracting and the whole shenanigans around it ;o)
Now what the hell do I do with the Ltd co I set up !!!

If you've not done anything with it at all just download form DS01 from Companies House and send it off with a cheque for £10. It will then be struck off after 3 months. Send a copy to HMRC with a covering letter explaining that nothing happened (you should had had a CT41G form that would have your CT reference on it that you'll need).

Or, leave the company dormant until you decide that you want to use it, perhaps in 6 months after you're used to contracting. If you're not VAT or PAYE registered then there shouldn't be any returns necessary in that time. You can always get it struck off later if you decide not to use it at that point either.

**malvolio** · 29 July 2012, 12:18

Originally posted by Benny Boy View Post

The thing I can't seem to get my head around is that even if I get the changes made to the contract to fall outside IR35, there's still no guarantee that Mr HMRC will come knocking at my door and dispute it

Let him. Assuming your contract is sound and properly reflects how you actually work, and assuming you've either joined the PCG or have some other kind of commercial insurance against the costs of an investigation, you're looking at a better than 99:1 chance against being judged to be inside IR35. The gap between employee and contractor wrt D&C, MOO and RoS are still quite wide.

I agree using an brolly until you understand this brave new world is a very good idea, but don't let IR35 be your yardstick. It's an annoyance and something you have to guard against, but it doesn't have to rule your entire commercial life. Life's too short.

**Benny Boy** · 29 July 2012, 16:58

Yeah, like a true pro, I had set up the Ltd Co, associated a company bank account and applied for VAT (was intending to use the FRS). Should have thought it all through first.
I intend to only contract six months a year and travel in between (nice romantic idea I know - sure it won't work out that way).

Another deciding factor to go Umbrella is that the majority of accountants work on a set monthly fee - so when I'm not working, I'll still be paying them otherwise they won't do the end of year stuff (so they tell me).

I'll give the VAT man a call tomorrow - but if anyone knows now, can I deregister the VAT aspect and if so, can I register again at a later date on the same company? I have only registered for VAT - I haven't requested FRS yet.

Accountant advised me to go Umbrella ?!?!