Ltd better than umbrella even if inside IR35?

[MB1983]

I currently work through an umbrella company, but would like to establish whether I could increase the % of earnings by starting a Ltd company. The problem is that I feel that my line of work means that I'll always be inside IR35. I work in analytics/statistics and would tend to apply for contracts like 'data analyst', 'BI/MI analyst', 'reporting analyst', etc. Most of these roles seem like they're basically a temporary version of a permanent job. In my last contract, for example, I was basically standing-in while a perm was recruited - I felt kind of like a 'temp' but on better money. From what I understand of IR35 it doesn't seem that I could be outside it. If this is the case, is it still beneficial to have a Ltd company or will I earn roughly the same as with an umbrella company?

[LisaContractorUmbrella]

I currently work through an umbrella company, but would like to establish whether I could increase the % of earnings by starting a Ltd company. The problem is that I feel that my line of work means that I'll always be inside IR35. I work in analytics/statistics and would tend to apply for contracts like 'data analyst', 'BI/MI analyst', 'reporting analyst', etc. Most of these roles seem like they're basically a temporary version of a permanent job. In my last contract, for example, I was basically standing-in while a perm was recruited - I felt kind of like a 'temp' but on better money. From what I understand of IR35 it doesn't seem that I could be outside it. If this is the case, is it still beneficial to have a Ltd company or will I earn roughly the same as with an umbrella company?

Depending on your earnings you may be a little better off but not a great deal. Saying that, IR35 applies to individual contracts so, although this role may be inside, the next one may not be in which case, if you were outside IR35, you would definitely be better of with a Ltd Co.

Running a company is not just about financial returns though - if you are thinking about going Ltd look into what your responsibilities will be, speak a good specialist accountant who understands the industry and IR35 and then decide if that's the route that you want to take

HTH

[kal]

I currently work through an umbrella company, but would like to establish whether I could increase the % of earnings by starting a Ltd company. The problem is that I feel that my line of work means that I'll always be inside IR35. I work in analytics/statistics and would tend to apply for contracts like 'data analyst', 'BI/MI analyst', 'reporting analyst', etc. Most of these roles seem like they're basically a temporary version of a permanent job. In my last contract, for example, I was basically standing-in while a perm was recruited - I felt kind of like a 'temp' but on better money. From what I understand of IR35 it doesn't seem that I could be outside it. If this is the case, is it still beneficial to have a Ltd company or will I earn roughly the same as with an umbrella company?

Costs are basically the same as the umbrella fee is roughly what you'll pay an accountant if you go Ltd. More admin with a Ltd granted but Ltd means that you have more flexibility (e.g If current contract is inside then funnel more into pension/training). 5% allowance regardless as well as Flat Rate VAT may be the deciding factor, for me another crucial point is that with a brolly you have yet another middle man holding onto your money while you pray they stay solvent long enough so that what you're owed gets to your bank account

[Wanderer]

I currently work through an umbrella company, but would like to establish whether I could increase the % of earnings by starting a Ltd company.

Yes, LTD company compared to Umbrella will give about 4-5% increase to your take home pay if you are IR35 caught. It does come at the expense of extra admin overhead and you will need to have an accountant engaged from day 1 to make sure you do it right.

On the positive side, you will have control of your income through your own company and there are other possibilities for tax planning like contributing to a pension.

The problem is that I feel that my line of work means that I'll always be inside IR35.

Don't presume that you are IR35 caught, get a professional contract review. If you find that you are indeed IR35 caught then I would suggest sticking with the umbrella and having a quiet life rather than taking on the responsibilities of being a company director and the hassle of dealing with HMRC.

If the reviewers find that you are outside IR35 then take a deep breath, get yourself a LTD company, an accountant with a decent book keeping system and an insurance policy that covers you for an IR35 investigation and taxes owed.

[craig1]

In addition to that post by Wanderer, if an analysis shows you're potentially outside IR35 then a prudent course of action would be to act outside IR35 but pay yourself inside it. Calculate exactly what you'd be paying yourself net inside and outside IR35 as a complete package then stick the difference into a savings account, bond or other savings mechanism somewhere. Seven years later (6 year legal time plus the 1 year filing time), use the money for that year for a nice treat for yourself.