New contractor looking for advice - Parasol or SCPay?

[Petrocelli]

Hi everyone

I've just landed my first "real" IT contract starting next week, and I've had a couple of umbrella organisations getting in touch to offer their services.

I just wondered if anyone had any experience of the two who have been in touch"Parasol" and "ECPay" to help me make my mind up.

I think the only think I'll really be looking to claim back will be travelling expences (100 miles a day) and perhapy my evening classes (£600).

Anyone got any advice they'd be willing to pass on to a greenhorn?

Thanks in advance

(One other thing - the place I'm based at the moment only has intermittant internet access so I might not be able to reply for a while...)

[The Lone Gunman]

Not the best place to ask for advice. General is usualy abusive and/or humorous.

But I am feeling generous.

My advice would always be to set up a Limited compay and get an accountant (the accountant can set up the company).
Gordon Brown is actively hunting down Brollies and Management companies.
These companies are just another layer of people skimming your bottom line.

Read the First Timers guide (link over there ---->) and there is a sticky in the Accounting section about Brollies Vs Ltd. by Simon from SJD.

Good luck.

[rootsnall]

Gordon Brown is actively hunting down Brollies and Management companies.

I don't think Gordon is gunning for the Parasols of the contracting world, he wants you there paying your full NI. If somebody is taking their first tentative steps into contracting they are a safe low worry ( if not tax efficient ) option.

[John Galt]

I agree - if you are new to the game or just plain lazy, like me, it is a pain free way to get paid. I don't use Parasol personally but there's been plently of discussion about them on the board

[Newby]

You are fine using an Umbrella until April 07, but after that you are going to have to look elsewhere.

Not that I believe everything that I read but I got this from Giant today, as I have worked through them before. It would appear that they might have already had a consultation with HMRC.

This is what it said.

"For clarity, from April 2007, there will only be 3 options for contractors to operate under

1. Agency PAYE
2. Umbrella
3. Limited Company

1. Agency PAYE
PAYE with no expenses

2. Umbrella
As the draft legislation stands, contractors will continue to claim for normal business expenses but 'home to work' travel and subsistence will be excluded from 5th April 2007. HM Treasury will confirm this in the Chancellors budget before the end of the tax year. An umbrella company can pay no dividends.

3. Limited Company
Under this option, contractors will have their own limited company and are in control of their company's financial and general management - making all decisions themselves. By operating through a limited company, contractors have the flexibility to enter into contracts that pass or fail IR35. Contractors will be able to pay themselves dividends and salary as appropriate. They will also be able to claim all their 'home to work' travel and the associated subsistence expenses along with other normal business expenses. All expenses will need receipts."

So, PAYE or Limited Company are highly likely to be the only route moving forward. But there is nothing to say that you couldnt run through any of the existing vehicles until April 6th!

[tim123]

You are fine using an Umbrella until April 07, but after that you are going to have to look elsewhere.

Not that I believe everything that I read but I got this from Giant today, as I have worked through them before. It would appear that they might have already had a consultation with HMRC.

This is what it said.

"For clarity, from April 2007, there will only be 3 options for contractors to operate under

1. Agency PAYE
2. Umbrella
3. Limited Company

1. Agency PAYE
PAYE with no expenses

2. Umbrella
As the draft legislation stands, contractors will continue to claim for normal business expenses but 'home to work' travel and subsistence will be excluded from 5th April 2007. HM Treasury will confirm this in the Chancellors budget before the end of the tax year. An umbrella company can pay no dividends.

3. Limited Company
Under this option, contractors will have their own limited company and are in control of their company's financial and general management - making all decisions themselves. By operating through a limited company, contractors have the flexibility to enter into contracts that pass or fail IR35. Contractors will be able to pay themselves dividends and salary as appropriate. They will also be able to claim all their 'home to work' travel and the associated subsistence expenses along with other normal business expenses. All expenses will need receipts."

So, PAYE or Limited Company are highly likely to be the only route moving forward. But there is nothing to say that you couldnt run through any of the existing vehicles until April 6th!

I agree with your analysis. I can't agree with your conclusions. There is no reason at all why 'umbrellas' wont remain a viable option for short-term contractors.


tim

[rootsnall]

2. Umbrella
As the draft legislation stands, contractors will continue to claim for normal business expenses but 'home to work' travel and subsistence will be excluded from 5th April 2007. HM Treasury will confirm this in the Chancellors budget before the end of the tax year. An umbrella company can pay no dividends.

Does subsistence include hotel/B&B costs ? If you can't claim that or your mileage then that rules out virtually all the expenses I would normally claim. I thought the IR were trying to push us into umbrellas to collect NI but this appears to be more encouragement to open a Ltd.

[jh0711]

try the PCG website

one of their quality products is an umbrella one.

I would also be wary of setting up a limited company - lots of upfront expenses if you only contract for 6 months - my recomendation would be to use a brolly for 1-1.5 years then if you are going to continue a life of contracting look at Ltd options.

[Newby]

tim, I agree that you will be able to use a brolly, but what is the point if you cannot claim business expenses? Its going to be no better than PAYE, in fact if you get charged for it, then you will be worse off. In fact why not just go to a payroll company and pay £5 a week.

p.s not my analysis but Giants!

[Xtrain]

try the PCG website

one of their quality products is an umbrella one.

I would also be wary of setting up a limited company - lots of upfront expenses if you only contract for 6 months - my recomendation would be to use a brolly for 1-1.5 years then if you are going to continue a life of contracting look at Ltd options.

If this is not spam I don't know what is!!! Which brolly do you work for? I used 2 PAYE brollys a couple of years back and lost over £4K in tax. The vast majority of ltd company providers now provide the ltd company setup free of charge and you can defo claim travel to work expenses AND maybe able to claim divvies (IR35 dependent of course). From April it is a complete no brainer...ltd is the only option (even if you were contracting only for a month!).