Preferred Umbrellas

**Wanderer** · 22 March 2011, 21:33

Originally posted by Dryv View Post

I would like to use a local accountant who says he can provide an umbrella service for me at a lower cost than what the agencies 'preferred' umbrellas charge.

Wow, really? How much does the agency's "preferred" umbrella charge then?

Generally agencies will have a preferred umbrella because they want to simplify their admin or possibly because they have a deal with the umbrella whereby they get paid for every person they introduce to the umbrella.

Is your expected yearly turnover going to be £200/day or more? If so then you should speak to your friendly accountant about setting up a LTD company and arranging to work outside IR35. You'll probably pay about £1000/year in accountancy but save a lot more than that in tax.

**Steven@Parasol** · 23 March 2011, 09:53

Originally posted by Dryv View Post

Hi Everyone,

Just looking for some advice from those more experienced than me. I am being advised by an agency that I can ONLY work for their client through one of their 'preferred' umbrellas or through my own LTD company (as I would be a director of this). I would like to use a local accountant who says he can provide an umbrella service for me at a lower cost than what the agencies 'preferred' umbrellas charge. He also does this for a number of other contractors. However the agency is telling me I cant do this as I am not a director of my accountants umbrellas service (obviously!!!)... does anyone know why they are insisting on this?

dRyV

We are on most of the big recruiter PSLs and I can confirm that we do not offer referrals to recruiters.

PSLs are becoming more and more of a risk mitigation tool as some umbrella companies are leaving recruiters and contractors open to large liabilities for a number of reasons.

For example, if your umbrella company goes under, as far as the end client is concerned, they have paid the recruiter and that's that. The recruiter then transfers these funds to the umbrella to pay the contractor. If that umbrella disappears, the contractor hasn't been paid and the recruiter can be liable to pay twice. There is also all the bad press that comes with this and reputational damage for the recruiter and the end client. The recruiters relationship with the end-client is also damaged so its not worth it for anybody.

If the PSL has been put together based on the financial strength of umbrella companies, their business models (pay when paid instead of offering terms for example), compliance, industry codes of conduct and independent audits etc, then the recruiter is doing its best to protect themselves, the client and the contractor from some of these risks.

Also moving forward, once the Bribery Act comes into play, recomending umbrellas based on referrals could leave individuals and companies open to prosecution so this is another risk to add to the list. There are very recent examples of some of the leading recruiters now refusing to work with umbrella companies because they have offered a referral scheme.

I'm not suggesting that this sort of thing still doesn't go on, but it is a practice that is becoming more of a risk to everyone involved so the big players will react.

Modern umbrella companies are a risk mitigation business for everyone in the supply chain and PSLs are changing to reflect this. There are too many historic exmaples of umbrella companies going under and leaving a mess for every and that image tarnishes all of us.

Is your accountant offering you a full contract of employment with all the statutiry rights that come with this as well as HR support, relevant insurance etc? If not you are leaving yourself exposed to various as above, cannot legally claim expenses to have them offset against your tax and may no have the necessary insurance inplace.

**rocketron** · 23 March 2011, 12:38

I had the same problem cant send you PM for some reason

**TheFaQQer** · 23 March 2011, 12:40

Originally posted by rocketron View Post

I had the same problem cant send you PM for some reason

Because you're both newbies - I've sent admin a message.

**C0ldf1re** · 23 March 2011, 12:43

"Umbrella" services do things for their own benefit, not yours! There are a host of potential pitfalls down the line. Setting up your own Ltd company is a nuisance, but much safer in the long run.

**Dryv** · 23 March 2011, 13:16

Originally posted by Steven@Parasol View Post

For example, if your umbrella company goes under, as far as the end client is concerned, they have paid the recruiter and that's that. The recruiter then transfers these funds to the umbrella to pay the contractor. If that umbrella disappears, the contractor hasn't been paid and the recruiter can be liable to pay twice.

why would the recruiter have to pay twice? surely the onus would be on the contractor that chose the umbrella company that decided to disappear?

**LisaContractorUmbrella** · 23 March 2011, 13:24

Originally posted by C0ldf1re View Post

"Umbrella" services do things for their own benefit, not yours! There are a host of potential pitfalls down the line. Setting up your own Ltd company is a nuisance, but much safer in the long run.

Could you name some?

**administrator** · 23 March 2011, 13:57

Thanks TheFaQQer - you should now have PM access Dryv.

**Nixon Williams** · 23 March 2011, 14:26

C0ldf1re
"Umbrella" services do things for their own benefit, not yours! There are a host of potential pitfalls down the line. Setting up your own Ltd company is a nuisance, but much safer in the long run.

Originally posted by LisaContractorUmbrella View Post

Could you name some?

Some suggestions would be :

1. Charging a higher fee if the processing is monthly rather than weekly - the cost to the umbrella should be no higher, just because the values are greater.

So instead of say, £30 per week or £120 per month - how about a fixed cost of £30 for each time an invoice is processed?

2. Claiming VAT back on mileage and not passing this saving on to the contractor.

3. Another link in the chain and so a greater risk of loss through an umbrella defaulting. We have seen several of these in the past few years and I am sure there will be more in the future.

These are just a few from the top of my head.

Benefits of your own limited company vs. an umbrella:

1. Benefit from the VAT Flat Rate Scheme - typical saving £1500 per annum, more in the first year;

2. Lower fees - typical saving £500 per annum.

3. Claim the same expenses, sometimes more.

4. No risk of an umbrella failing.

5. Greater tax savings due to being able to use dividends.

Alan

Preferred Umbrellas