Future of umbrellas..

[Worzel]

Been reading some of the stuff regarding MSC's post April next year. IMO it doesn't look good for all umbrellas, not just the more adventurous schemes. I mean, what would be the point of using a PAYE umbrella when you don't get the full benefit of the 1 remaining tax perk they currently offer (i.e expenses)? Not as if you're getting any "real" employee benefits either is it? Might as well be a permie!

So what's everyone gonna do? Switch back into their own Ltd's? I've used all the available options over the years (LTD, PAYE umbrella, MSC) and the thought of having to go back to the hassle of running a LTD doesn't fill me with joy.

Putting the blatent tax dodging schemes to one side, the thing I don't understand is that these umbrella schemes were created due to a very real demand for a simpler way of working. A sort of "outsourcing" for people who don't want to deal with the paperwork of managing a LTD themseleves. Now, as we all know, outsourcing is rife in many other areas of business so it seems harsh to go after IT schemes - afterall we must be pretty small beer in the grand scheme of things. I personally have found the "one-stop-shop" element of umbrellas to be extremeley useful but I fear that agencies might start to get reluctant to deal with them.

So I reckon the umbrellas in their current form are possibly a victim of their own success. I do wonder though if there will be a similar low hassle option in the future? Any opinion on this other than "be a real man and run your own Ltd"? (been there, done that, didn't particularly enjoy it!)

[VectraMan]

I mean, what would be the point of using a PAYE umbrella when you don't get the full benefit of the 1 remaining tax perk they currently offer (i.e expenses)? Not as if you're getting any "real" employee benefits either is it? Might as well be a permie!

That's not really true. You still stand to earn substantially more as a contractor even without expenses and paying the full amount of PAYE, and to all the people who aren't interested in running their own businesses and just want a well paying job, an umbrella still makes a lot of sense. I started out like that, and to be honest the expenses thing kind of took me by suprise.

[hattra]

I think the only alternative is to go for your own Ltd, and outsource the accounts work. I found a number of outfits like that on the net last week that I'm going to investigate in more detail. It looks as if it'll be similar to operating as part of a composite, with on-line accounts software, helplines etc., but you are director of your own company, and consequently are able to take on whatever business you want - the composites didn't seem too keen on taking on hardware sales etc. Up-front costs are higher, but overall, the costs are similar. Personally I wouldn't be surprised if the established umbrella/ composite companies come out with something similar before the April 2007 deadline.

[Sysman]

I think the only alternative is to go for your own Ltd, and outsource the accounts work.

That's not such a bad idea. When I started my contracting career I was perfectly capable of doing my own day to day accounts, using an accountant just for the year end tax bit.

However, once I found myself living out of a suitcase, keeping up with day to day accounts became a nightmare. That little old lady down the road who did basic book keeping for small businesses came to the rescue for that, and a lot cheaper than using an accountant for everything.

[Newby]

I have had a conversation with my old msc and they have confirmed that they are going to change their model to have contractors as directors and have the bank account in the contractors name also. So it looks as if gordo has come up with another duff law that wont net him as much tax as he thinks it will. When will he learn?

[Cowboy Bob]

So it looks as if gordo has come up with another duff law that wont net him as much tax as he thinks it will. When will he learn?

Given that the law isn't drafted yet, I suspect that El Gordo will be listening to what the MSCs are saying they're going to do and head them off at the pass.

[LordF]

Spoke with my umbrella last week and they have sent me a signed letter stating that the proposed regulations for MSCs do not apply to them (we are not paid dividends and are not directors/shareholders) and I will be ok.

[DaveB]

Spoke with my umbrella last week and they have sent me a signed letter stating that the proposed regulations for MSCs do not apply to them (we are not paid dividends and are not directors/shareholders) and I will be ok.

Except that you will lose all your currently allowable expenses. Unless you are already an employee of the brolly under PAYE+NI etc. and don't get them anyway.

The only practical response to the PBR is to drop the MSC's and start up your own ltd. You'll make more money in the long run.

[Newby]

LordF, your company is talking out of their bottom!!! It is merely trying to keep your business. I would start looking asap for a solution for April 07! You could always set up your own ltd

[Newby]

and as far as gordo heading msc's off at the pass, from what the guys I spoke to said, if he shuts them down then he will have to shut down every accountancy firm that supports small businesses. But I am not Gordo, although I wish I was, then I could take a running jump!!!!