Umbrella's & VAT

[RobAnt]

I have a VAT query, regarding my umbrella company.

In your considered opinion, because: -

a) My umbrella co. charge VAT for my services
and
b) they make me pay my own Employers NI & Tax.

My contract rate is "gross", and I am required to pay ALL fees and taxes from that gross amount - including VAT (which is added to invoices by them, on my behalf). We charge £16.50/hour plus VAT.

Does that make me a "Part" of my umbrella co (if you like), and therefore entitle me to be able to reclaim VAT via them on items I purchase for business use?

I wonder if, when presented with VAT rated invoices, they DO reclaim VAT on items that their clients purchase for business use?

Cheers,
Rob

[malvolio]

Are you (not the brolly, you or YourCo) VAT registered? Thought not.

And if you aren't, you can't reclaim VAT on stuff you buy for your work. (Yet another reason to run your own company then!) The brolly is charging VAT to their client for your services and repaying it back to the Revenue, less the VAT element of their own expenditure. What you spend on VATable goods is neither here nor there.

Interesting question here - you are in effect an employee of the brolly, yet you are paying NICs and PAYE out of your gross earnings, as well as paying their fees, and getting no other benefits. Do you not see a slight reality check somewhere? Any glimmer as to why I run my own company??
Well hey, it's your money you're wasting.

[RobAnt]

Are you (not the brolly, you or YourCo) VAT registered? Thought not.

And if you aren't, you can't reclaim VAT on stuff you buy for your work. (Yet another reason to run your own company then!) The brolly is charging VAT to their client for your services and repaying it back to the Revenue, less the VAT element of their own expenditure. What you spend on VATable goods is neither here nor there.

Interesting question here - you are in effect an employee of the brolly, yet you are paying NICs and PAYE out of your gross earnings, as well as paying their fees, and getting no other benefits. Do you not see a slight reality check somewhere? Any glimmer as to why I run my own company??
Well hey, it's your money you're wasting.

Actually, I do get a number of benefits, being a member of this umbrella company - I am professionally insured and I don't have to pay for an accountant - which would both equal about the same amount anyway.

[malvolio]

I'm professionally insured, for around half a day gross income pa. Accountants fees are equivalent to 2 days gross income pa. I can recover all VAT spent. I take home around 78% of gross income. I set my own expense policies. I can easily run several income streams. Nothing magic, it's just how I prefer to run my business.

The real reason for using the umbrella route is to de-risk the operation almost completely (assuming you're not using one of the silly-money schemes that will get sat on by Hector) and because you don't have to bother with about a day's paperwork a quarter at most. If that's what you want then that's fine and I don't have a problem with it. But there's no way you can legitimately take home more than you can with your own company. Whether the odd 1-2% extra is worth the extra work is your call - and on your rates, it quite probably isn't.

[Robot]

Umbrella’s companies making more money!

The umbrella company collects all the VAT puts it in a high interest account, and builds up lots of bank interest, just think 100s of employees, must make a fair few bob out of that!

Insurance must have a bearing here, no doubt the umbrella companies make money out of this as they charge the employees a per% of turnover to cover the insurance, no doubt over a certain number of clients they start to make a profit on it.

On top of that they charge you fees!

I would suggest regardless of IR35 position you go through a Limited company.