Dispensation riddle: Joe the contractor

[hiteshg]

I am Joe, a simple UK contractor. I earn 125 pounds per day and work 20 days a month on average. So my average earnings are 125x20=2500. Every month my client pays 2500 pounds to my umbrella company. I can get that money either as expenses or as salary from umbrella less the fees.

They charge me fees to do two jobs properly.

a. Calculate taxes on my salary component and pay it to HMRC.

b. Verify my expense claims, maintain its records.

Calculating appropriate taxes is just another calculation and is a software job. I don’t think there is much manual work involved. Many DIY free software are available to do this end to end.

The only real work that my umbrella does it verifying my expense claims. Maintaining those receipts and submitting them to HMRC whenever they come back for investigation.

Now, as my umbrella has dispensation. It need not have to do that anymore. I am responsible for maintaining all the receipts and ensuring all the rules for claiming are met. If there is a lapse on this HMRC will catch me. I should maintain my own record book.

Then why the hell did I pay my umbrella?

[DS23]

Then why the hell did I pay my umbrella?

because you are simple?

[Beefy198]

You can argue about how MUCH you're paying them for all this, but there is an element of:

Insurance cover
Statutory rights (e.g. maternity/paternity pay)
Them keeping abreast of legislation developments, tax tables etc.
Someone doing the chasing (e.g. contracts, late payments) for you

....in your fee

[DiscoStu]

If you're earning £125 a day I suggest you quit contracting and go permie.

HTH

[Benno]

If you're earning £125 a day I suggest you quit contracting and go permie.

HTH

Yeah cos permie rates are so much more aren't they?

[MPwannadecentincome]

I am responsible for marinating all the receipts and ensuring all the rules for claiming are met.

Your poor brolly has to deal with marinated receipts so they are entitled to charge for cleaning them up - BTW what do you marinate them in?

That aside, the umbrella still keeps the receipts ready for inspection should it prove necessary in an audit, except the daily subsidence of course you have to keep those yourself.

[DiscoStu]

Yeah cos permie rates are so much more aren't they?

Working 47 weeks PA on £125 a day is less than £30K a year. If this is all the skills you have can earn you as a contractor then it's probably best to find a permie job that'll teach you some new ones.

HTH

[hiteshg]

You can argue about how MUCH you're paying them for all this, but there is an element of:

Insurance cover
Statutory rights (e.g. maternity/paternity pay)
Them keeping abreast of legislation developments, tax tables etc.
Someone doing the chasing (e.g. contracts, late payments) for you

....in your fee

There are good insurance covers for about 200 pounds a year. anyway that will indemify my client not me . Why should I pay them fee ? when they are not doing thier duty. cheapest is 60 pound a month.

Given all those rights (maternity/paternity pay), cant make me Permie. Anyways they will pay all statutory payments from my own money i.e 2500 pounds not from thier pocket. so whats the point ?

End of the day. They can only send remainder mails to finace department. I have to speak to the guys there if there is a delay they wont send some one to collect my fees. so ground reality is I am paying them for nothing.

[hiteshg]

Thats just an example

If you're earning £125 a day I suggest you quit contracting and go permie.

HTH

Thats just an example. I am making a differnt point here. Whats the dam point in paying to umbrella company, if they have dispensation agreed ? what value does it add to me as a contractor? Is it not that they running away from thier resoponsibilities. The very point I am paying them for ?

[hiteshg]

Your poor brolly has to deal with marinated receipts so they are entitled to charge for cleaning them up - BTW what do you marinate them in?

That aside, the umbrella still keeps the receipts ready for inspection should it prove necessary in an audit, except the daily subsidence of course you have to keep those yourself.

But subsitence are the most cumbersome to maintain with also forms a major portion of expense claims. Umbrella only needs to do a survey to make sure evryone is still claiming as per guidelines. That point is not really gone well to me, really subsitance is for large organizations like GM with huge employee base. They will ask employees to maintain bills. coz they pay them. Why should joe maintain the reciepts when he is paying the umbrella ?