With Umbrella should I go Self Employed ?

[swebb]

Hi there,

I started contracting about 18 months ago and use Parasol as an umbrella. I must admit when I started I just assumed that due to IR35 rules that was my only real option.

My first contract was 12 months in length and my current is 6 months and I'm on about 38pr. I work at the customers sites and use there kit.

Have I missed a trick here, could I have setup my own company and saved myself some tax or is an umbrella my only option. I have read the new starters guide again and also a fair few pages on IR35 which would suggest I am correct in what I'm doing. I have noticed however a fair amount of messages on the forums here that are making me think twice about what I thought was correct. If I could stop paying NIC twice (employees & employers) that would be nice especially as I don't even get on the dentist on the NHS anymore !!!

Thanks for any advice

Swebb

[Xenophon]

Read this STICKY
Are you sure you are caught by IR35 (i.e. have you had your contract reviewed by a specialist)? Even if you are your own company is still a good option.

[swebb]

Hi thanks for the reply

Well I suppose that is the main question really. Its the IR35 situation that I am finding so difficult to figure out. It all seems such a grey area and the way the rules are worded doesn't help.

Initially I had assumed that because I was working on site, using their kit and following their plans that I was within IR35. However reading some of the comments on here it doesn't seem so clear cut.

So do people get a specialist to check the contract every time they get a new one ? Usually I go for an interview, get the offer and I'm working at the company the next day or within a few days that doesn't leave much room for getting the contract checked or possibly changed I would have thought.

You mention that is probably still better going Self Employed even if within IR35. I read the thread that described all of this but its still not really clear to me where any extra saving can be made. It would be handy being able to set up a SIPP and maybe lease a car though.

Thanks again

Swebb

[ASB]

Self Employed even if within IR35.

I assume you mean being an employee of you own company (which is not being self employed in the legal sense). Self-Employed and IR35 are mutually exclusive. This is a matter of law.

If you are caught by IR35 and you use your own company then the only real saving you can make is by paying into an authorised pension plan. This may or may not be a wise strategy depending upon your age, view of pension etc. But it will lead to a large tax and NI saving at the time of contributions. Assuming the company make the contributions and you are a higher rate taxpayer then you have the choice of 100 quid in the pension or 52 in your pocket.

It's also important to note the effect at the other end though, the pension income it produces will be largely taxable. The relaxation in pension rules may open up more choices for you regarding investment style and asset classes though.

[delsvan]

I use Dasa Consulting

Try www.dasaconsulting.co.uk as an umbrella - they seem competant and if you email me first, I can get my nice big referral bonus!

www.trottervanhire.com

[DaveB]

Hi thanks for the reply

Well I suppose that is the main question really. Its the IR35 situation that I am finding so difficult to figure out. It all seems such a grey area and the way the rules are worded doesn't help.

Initially I had assumed that because I was working on site, using their kit and following their plans that I was within IR35. However reading some of the comments on here it doesn't seem so clear cut.

So do people get a specialist to check the contract every time they get a new one ? Usually I go for an interview, get the offer and I'm working at the company the next day or within a few days that doesn't leave much room for getting the contract checked or possibly changed I would have thought.

You mention that is probably still better going Self Employed even if within IR35. I read the thread that described all of this but its still not really clear to me where any extra saving can be made. It would be handy being able to set up a SIPP and maybe lease a car though.

Thanks again

Swebb

If you dont have the experiance yet to know what to look for in a contract then yes, get it reviewed. A decent contractors accountant should be able to do it for you or talk to Bauer and Cottrell, very good, very fast and reasonable cost.

It's been said many times here that IR35 is largely voluntary. Get a good accountant and get your contracts reviewed. Be positive about asking for changes. Most agencies wont want to lose the gig for the sake of minor contract alteration.

After a while you'll get a feel for the requirements to look for in contracts and be able to decide for yourself if it's IR35 friendly or not. In the mean time you can do worse than join the PCG and get their standard contracts to look at and base your contracts on. It's worth the membership just for that and the tax investigation insurance.

[Jay54]

If you dont have the experiance yet to know what to look for in a contract then yes, get it reviewed. A decent contractors accountant should be able to do it for you or talk to Bauer and Cottrell, very good, very fast and reasonable cost.

It's been said many times here that IR35 is largely voluntary. Get a good accountant and get your contracts reviewed. Be positive about asking for changes. Most agencies wont want to lose the gig for the sake of minor contract alteration.

After a while you'll get a feel for the requirements to look for in contracts and be able to decide for yourself if it's IR35 friendly or not. In the mean time you can do worse than join the PCG and get their standard contracts to look at and base your contracts on. It's worth the membership just for that and the tax investigation insurance.

I use Bauer&Cottrell now to review all my contracts and they may also be able to give you some advice if you phone them.