PDA

View Full Version : Hopeful return to the fold



crates
30th July 2013, 17:26
After long period as a permie I've taken the decision to get back to contracting. This time I'll be using a brolly as I fully expect to be IR35 caught.

I have SIPP which contains all my pension assets accumulated over the years which I manage myself. Ideally I would like to have contributions made into this by my 'employer', rather than signing up for their own bucket-shop stakeholder job. The question I'd like to ask is... is it ok/legal for a brolly to do this ?

I know I could simply take the maximum salary and make personal contributions into my SIPP, but that's after EE/ER NICS have been deducted and the SIPP provider can only reclaim the TAX. As I understand it, if my emploer paid directly into the SIPP, there would only be a liability for NICs on the balance which is then paid in salary.

Can anyone confirm this and better still, suggest any brollies that are happy to do so. I have already approached a number and have been told they won't do it... although a couple have said it's not a problem.

If anyone else is doing this, which brolly are you using.

LisaContractorUmbrella
31st July 2013, 07:08
Has the umbrella company that agreed to make the contribution said whether or not you would get tax relief on the contribution?

crates
31st July 2013, 10:13
Has the umbrella company that agreed to make the contribution said whether or not you would get tax relief on the contribution?

Most have refused stating that I must sign up to their stakeholder pension, which I don't want to do. Two have said they can do it but one of those seems confused (hence why I've dismissed them too).

The final one has given me an illustration which shows the contribution to the SIPP will be paid out of the contract earnings (gross). Then they take out expenses claimed. They then calculate the ER-NICS which leaves abalnce as salary, on which I am taxed and NI'd to death)

So yes, they are taking the SIPP out of the gross which was what I hoped would happen. The alternative of paying my SIPP contribution personally (i.e. out of NET income) would mean that my SIPP provider could reclaim the tax, howver I will have paid ER/EE NICS on the contribution which I could not recover.

Is that correct ?

LisaContractorUmbrella
31st July 2013, 10:22
Most have refused stating that I must sign up to their stakeholder pension, which I don't want to do. Two have said they can do it but one of those seems confused (hence why I've dismissed them too).

The final one has given me an illustration which shows the contribution to the SIPP will be paid out of the contract earnings (gross). Then they take out expenses claimed. They then calculate the ER-NICS which leaves abalnce as salary, on which I am taxed and NI'd to death)

So yes, they are taking the SIPP out of the gross which was what I hoped would happen. The alternative of paying my SIPP contribution personally (i.e. out of NET income) would mean that my SIPP provider could reclaim the tax, howver I will have paid ER/EE NICS on the contribution which I could not recover.

Is that correct ?

IANAIFA but I don't believe that the umbrella company should be able to give tax relief on a personal contribution which is why most have refused (as we would have done) and referred you to their own employer schemes

TheFaQQer
31st July 2013, 10:26
Why not just go Ltd?

crates
31st July 2013, 15:19
IANAIFA but I don't believe that the umbrella company should be able to give tax relief on a personal contribution which is why most have refused (as we would have done) and referred you to their own employer schemes

Maybe I'm not explaining this very well.

Almost all companies offer their employees a pension, into which the company pays a contribution. The employee is not taxed or NIC'd on this contribution. Agreed ?

If I decline the company pension and make a PERSONAL contribution instead, it would come out of taxed AND NIC'd nett earnings, the SIPP provider reclaims the tax BUT CANNOT RECLAIM THE NIC I HAVE PAID. This is why I don't want to make personal contributions myself from nett income.

Most brollies are saying I must join their own scheme, into which they pay a contribution nett of tax and NIC. If they can do this, why not into my SIPP instead.

My point is that as the employer pays into the pension/SIPP it is paid before tax, and more significantly 2 lots of NIC, are levied. Making a personal payment from nett, results in a higher NIC payment being made which cannot be recovered by the SIPP provider.

Does that make sense ?

LisaContractorUmbrella
31st July 2013, 15:24
Maybe I'm not explaining this very well.

Almost all companies offer their employees a pension, into which the company pays a contribution. The employee is not taxed or NIC'd on this contribution. Agreed ?

If I decline the company pension and make a PERSONAL contribution instead, it would come out of taxed AND NIC'd nett earnings, the SIPP provider reclaims the tax BUT CANNOT RECLAIM THE NIC I HAVE PAID. This is why I don't want to make personal contributions myself from nett income.

Most brollies are saying I must join their own scheme, into which they pay a contribution nett of tax and NIC. If they can do this, why not into my SIPP instead.

My point is that as the employer pays into the pension/SIPP it is paid before tax, and more significantly 2 lots of NIC, are levied. Making a personal payment from nett, results in a higher NIC payment being made which cannot be recovered by the SIPP provider.

Does that make sense ?

It does make sense yes and you can't do it - if you want to make a personal contribution it must be made from your net earnings

crates
31st July 2013, 19:57
How is my employer making a payment into a SIPP any different from making the same payment into a stakeholder ?

How is that a personal contribution ?

By joining the 'company' plan instead, I am forced with having to transfer the company pension into my SIPP at a later date.

Arguably, it makes sense to change brollies regularly in order to be able to leave their scheme to affect a transfer.

What a load of bullocks.

I'll call HMRC and see what they have to say.

TheFaQQer
1st August 2013, 08:22
I'll call HMRC and see what they have to say.

Why bother - if your employer says no, then that's the end of it.

crates
1st August 2013, 19:32
Why bother - if your employer says no, then that's the end of it.

Huh ? I don't have an employer yet. This is one of the questions I've been firing at brollies. Some are happy to pay into my SIPP from gross, others are not.

I shall use a brolly that is prepared to do it, but check it's OK with HMRC first.

This thread relates to SIPP contribs made by a contractors Ltd, but the same rules should appy to brollies. If they don't someone please explain why
http://forums.contractoruk.com/accounting-legal/90821-sipp-contributions-personal-vs-via-ltd-company.html

TheFaQQer
2nd August 2013, 08:17
Huh ? I don't have an employer yet. This is one of the questions I've been firing at brollies. Some are happy to pay into my SIPP from gross, others are not.

I shall use a brolly that is prepared to do it, but check it's OK with HMRC first.

This thread relates to SIPP contribs made by a contractors Ltd, but the same rules should appy to brollies. If they don't someone please explain why
http://forums.contractoruk.com/accounting-legal/90821-sipp-contributions-personal-vs-via-ltd-company.html

Sorry, I took it from your post number 3 that you only had one umbrella who would consider this. If you've only got one option, then discussing things with HMRC seems a moot point - they may provide absolutely clear guidance that it's OK, but if you can't find an umbrella who will do it then it makes no difference.

malvolio
2nd August 2013, 09:09
This thread relates to SIPP contribs made by a contractors Ltd, but the same rules should appy to brollies. If they don't someone please explain why
http://forums.contractoruk.com/accounting-legal/90821-sipp-contributions-personal-vs-via-ltd-company.html
Why do you think they should? They are completely different scenarios; you are an employee of the umbrella, not a shareholding director of it.

LisaContractorUmbrella
2nd August 2013, 09:17
WMS umbrella companies offer pension schemes to their employees and the employees are entitled to tax relief on the contributions - this does not apply if they were to make contributions to a personal scheme

Nixon Williams
4th August 2013, 18:08
Even if your contract is caught by IR35 (I assume that you have had it checked?) it is still financially beneficial to operate through a limited company, even though the savings are reduced.

If you wish to make SIPP contributions then certainly operating through a limited company can make a great deal of sense.

CoolCat
5th August 2013, 13:26
I pulled out of a brolly pension agreement. My basic problem was they were paying the pension in preference to expenses. I was running mega (legit) expenses (don’t ask, and not all the time) and to find they had not been completely covered but the pension payment had gone through was the exact reverse of what I was expecting (and what I had been told when I signed up for it). I would have had no probs with the pension catching up later. The risk of ending a contract, and possibly the engagement with that brolly, while still having significant expenses outstanding was too much. And being expenses I wanted the money to cover the corresponding credit card bills etc.

The other thing I was not very happy about was needing to choose a fixed amount each month, when earnings were so variable. I would have been much happier with a percentage of pay or invoices.

So I ended up just writing a cheque monthly to a personal pension. Sure I took a hit on the national insurance, but it was the only way I could control it.

LisaContractorUmbrella
5th August 2013, 13:36
I pulled out of a brolly pension agreement. My basic problem was they were paying the pension in preference to expenses. I was running mega (legit) expenses (don’t ask, and not all the time) and to find they had not been completely covered but the pension payment had gone through was the exact reverse of what I was expecting (and what I had been told when I signed up for it). I would have had no probs with the pension catching up later. The risk of ending a contract, and possibly the engagement with that brolly, while still having significant expenses outstanding was too much. And being expenses I wanted the money to cover the corresponding credit card bills etc.

The other thing I was not very happy about was needing to choose a fixed amount each month, when earnings were so variable. I would have been much happier with a percentage of pay or invoices.

So I ended up just writing a cheque monthly to a personal pension. Sure I took a hit on the national insurance, but it was the only way I could control it.

I assume that your pension and expenses would have pushed your taxable earnings below minimum wage; if this was the case then the umbrella company couldn't do anything other than not process your expense claims if you had signed up to monthly pension contributions.

CoolCat
5th August 2013, 17:43
I assume that your pension and expenses would have pushed your taxable earnings below minimum wage; if this was the case then the umbrella company couldn't do anything other than not process your expense claims if you had signed up to monthly pension contributions.

No they paid the hours worked x minimum wage 1st (and a % towards holiday pay), then pension, then expenses, then rest is bonus effectively. As I said the biggest problem for me was at times where expenses would be covered but only if paid before the pension.

LisaContractorUmbrella
6th August 2013, 07:13
No they paid the hours worked x minimum wage 1st (and a % towards holiday pay), then pension, then expenses, then rest is bonus effectively. As I said the biggest problem for me was at times where expenses would be covered but only if paid before the pension.

That's the point I'm trying to make - pension contributions and expenses will reduce your taxable income - if the application of both takes that income below minimum wage then the umbrella company would be contravening the minimum wage legislation and therefore would only process pension contributions and whatever level of expenses would not represent a contravention

CoolCat
6th August 2013, 07:57
That's the point I'm trying to make - pension contributions and expenses will reduce your taxable income - if the application of both takes that income below minimum wage then the umbrella company would be contravening the minimum wage legislation and therefore would only process pension contributions and whatever level of expenses would not represent a contravention

yes they applied a precedence to payments, as above. so that minimum wage always got paid 1st. and in event money available didnt cover all outstanding expenses or pension due they would just carry over amount owed into next payroll run. no problem with any of that. what i did object to was pension being kept up to date while expenses were allowed to build a big backlog of unpaid amounts. happened that way as i worked a lot some months and hardly any other months and so on. the whole point of an umbrella for me is getting the expenses out tax free quickly and easily, when they were doing this it just destroyed the whole point of the thing.

LisaContractorUmbrella
6th August 2013, 08:15
yes they applied a precedence to payments, as above. so that minimum wage always got paid 1st. and in event money available didnt cover all outstanding expenses or pension due they would just carry over amount owed into next payroll run. no problem with any of that. what i did object to was pension being kept up to date while expenses were allowed to build a big backlog of unpaid amounts. happened that way as i worked a lot some months and hardly any other months and so on. the whole point of an umbrella for me is getting the expenses out tax free quickly and easily, when they were doing this it just destroyed the whole point of the thing.

But you had signed up to the pension scheme and presumably had agreed a monthly contribution to it which the umbrella company would have been bound to make - there really isn't anything else they could have done unless you decided to cancel your pension contributions.

CoolCat
6th August 2013, 08:43
But you had signed up to the pension scheme and presumably had agreed a monthly contribution to it which the umbrella company would have been bound to make - there really isn't anything else they could have done unless you decided to cancel your pension contributions.

I was quite careful to check this when i signed up for the pension fund. They explained that in event of insufficient funds to pay both expenses and pension that expenses would get paid 1st and pension would carry over. Thats what I agreed to, and thats what i expected. The fact the didnt do that cheesed me off.

Pension provider more than happy to have backlog of payments when i took a few months off and so on, and this would have been no different.

In my view it was more to do with making sure the brolly got their commission on the pension paid, cynical old me eh.

LisaContractorUmbrella
6th August 2013, 08:49
I was quite careful to check this when i signed up for the pension fund. They explained that in event of insufficient funds to pay both expenses and pension that expenses would get paid 1st and pension would carry over. Thats what I agreed to, and thats what i expected. The fact the didnt do that cheesed me off.

Pension provider more than happy to have backlog of payments when i took a few months off and so on, and this would have been no different.

In my view it was more to do with making sure the brolly got their commission on the pension paid, cynical old me eh.

So, what did they say when you complained??

CoolCat
6th August 2013, 11:02
So, what did they say when you complained??

nothing, so i just withdrew from the pension fund.

LisaContractorUmbrella
6th August 2013, 12:11
nothing, so i just withdrew from the pension fund.

If they didn't respond to your complaint then maybe look for a better umbrella company :wink

CoolCat
6th August 2013, 14:00
If they didn't respond to your complaint then maybe look for a better umbrella company :wink

does ur umbrella do this? just out of interest?

LisaContractorUmbrella
6th August 2013, 14:11
does ur umbrella do this? just out of interest?

Respond to complaints? Yes definitely - we have a complaints procedure and, ultimately, if anyone isn't happy with our service for any reason they can always email me direct.

CoolCat
6th August 2013, 16:55
Respond to complaints? Yes definitely - we have a complaints procedure and, ultimately, if anyone isn't happy with our service for any reason they can always email me direct.

and can you pay expenses before pension ? or do you do it as above?

northernladuk
6th August 2013, 17:13
Respond to complaints? Yes definitely - we have a complaints procedure and, ultimately, if anyone isn't happy with our service for any reason they can always email me direct.

You will have your arm ripped off and then be beaten senseless with it, but yes, you can complain to Lisa directly if you wish.

Trevor1967
6th August 2013, 21:05
Respond to complaints? Yes definitely - we have a complaints procedure and, ultimately, if anyone isn't happy with our service for any reason they can always email me direct.


Hello Lisa

Could you give me your direct email please. I joined ContractUmbrella recently and i am having a couple of issues already. .I look forward to hearing from you.:frown

LisaContractorUmbrella
7th August 2013, 06:50
and can you pay expenses before pension ? or do you do it as above?

If you sign up to a pension you will have an obligation to make contributions to it on a monthly basis; the pensions provider will assume that these contributions will be made for the lifetime of the scheme. It is not common for people to make contributions irregularly as it will affect the return on the scheme (IANAIFA but this is as I understand it). If you advised us, in a particular month, that you did not wish to make a contribution to your pension then we would advise the provider and would not make the deduction through payroll. If, however, we were not notified we would make the deduction for the pension before processing expenses.

HTH

LisaContractorUmbrella
7th August 2013, 06:51
You will have your arm ripped off and then be beaten senseless with it, but yes, you can complain to Lisa directly if you wish.

:rollin::rollin::rollin:

LisaContractorUmbrella
7th August 2013, 06:52
Hello Lisa

Could you give me your direct email please. I joined ContractUmbrella recently and i am having a couple of issues already. .I look forward to hearing from you.:frown

Of course - lisa@contractorumbrella.com

CoolCat
7th August 2013, 08:49
If you sign up to a pension you will have an obligation to make contributions to it on a monthly basis; the pensions provider will assume that these contributions will be made for the lifetime of the scheme. It is not common for people to make contributions irregularly as it will affect the return on the scheme (IANAIFA but this is as I understand it). If you advised us, in a particular month, that you did not wish to make a contribution to your pension then we would advise the provider and would not make the deduction through payroll. If, however, we were not notified we would make the deduction for the pension before processing expenses.

HTH

I think in umbrella land, there is market for a different approach. Agree to pay expenses before pension (and let the pension company take a hike if they have a problem with that, I am sure some pension company could be got to agree to this). And ideally make the pension contribution a % of either invoices or pay, rather than a fixed amount per month. The only problem I can see is with the commission the folk advising on the pension would get, but then thats not my top concern.

I realise many payroll systems are not setup to make this easy.

LisaContractorUmbrella
7th August 2013, 09:37
I think in umbrella land, there is market for a different approach. Agree to pay expenses before pension (and let the pension company take a hike if they have a problem with that, I am sure some pension company could be got to agree to this). And ideally make the pension contribution a % of either invoices or pay, rather than a fixed amount per month. The only problem I can see is with the commission the folk advising on the pension would get, but then thats not my top concern.

I realise many payroll systems are not setup to make this easy.

It's not really possible to have a different approach unfortunately - if you sign up to a pension scheme you make a commitment to make regular contributions - I don't think any provider would operate a scheme that allowed you to contribute as and when you felt like it. However, our scheme does allow contributions as a percentage of your earnings which may be the solution you are looking for.

CoolCat
7th August 2013, 12:29
Re "I don't think any provider would operate a scheme that allowed you to contribute as and when you felt like it" most pension providers are happy with "one off" payments and are as happy to process them as "regular monthly payments". Just make every single payment a "one off" and then you can vary the amount month by month?

LisaContractorUmbrella
7th August 2013, 12:34
Re "I don't think any provider would operate a scheme that allowed you to contribute as and when you felt like it" most pension providers are happy with "one off" payments and are as happy to process them as "regular monthly payments". Just make every single payment a "one off" and then you can vary the amount month by month?

One off payments is one thing - to sign up to a regular contribution and then chop and change as you see fit is something different but, to be honest, this would really be a question for pensions providers rather than your umbrella company - we can only work within the bounds of the schemes that they offer.

CoolCat
7th August 2013, 13:02
One off payments is one thing - to sign up to a regular contribution and then chop and change as you see fit is something different but, to be honest, this would really be a question for pensions providers rather than your umbrella company - we can only work within the bounds of the schemes that they offer.

Maybe setup with a regular monthly payment of a nominal amount, say 10 quid a month, and pay rest up to given percentage as a one off payment per month? That way pension provider gets the monthly payment agreed, but the contractor gets to put in the 10% (rather than fixed amount) that he has in mind... And run the one off payments through payroll like anything else?

Just thinking out loud now

LisaContractorUmbrella
7th August 2013, 13:05
Maybe setup with a regular monthly payment of a nominal amount, say 10 quid a month, and pay rest up to given percentage as a one off payment per month? That way pension provider gets the monthly payment agreed, but the contractor gets to put in the 10% (rather than fixed amount) that he has in mind... And run the one off payments through payroll like anything else?

Just thinking out loud now

:smile Shouldn't worry - it will all change with auto-enrolment anyway

CoolCat
7th August 2013, 13:23
:smile Shouldn't worry - it will all change with auto-enrolment anyway

Isnt that just a 1% thing?

Wont most contractors opt out anyways?

LisaContractorUmbrella
7th August 2013, 13:28
Isnt that just a 1% thing?

Wont most contractors opt out anyways?

Maybe but they all have to be signed up regardless - they then have the option to opt-out