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  1. #1

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    Default Naive question

    I've been out of the UK for 12 years now back in London and working again. I've just got my first role via an agency and I'm on their payroll under PAYE which is fine as I have a full personal allowance and are actively looking for a new role. I've now gotten a better role starting next week which is also via PAYE I was offered the option of being paid via my own ltd by the agency but I'm not ready yet.

    I am setting up a new company of my own as in the long term I want to offer technology solutions to different businesses, but at the moment I need to work to pay the bills and to be able to invest in the product area I am interested in and so on.

    I don't have the company registered yet, so no bank account or insurance or anything setup yet.

    I understand now about IR35 and being in or outside, that the employer now needs to make the determination after April and the % difference I need to charge if insider or outside so I am in no different a position etc.

    What I am less clear on is what the difference is if I set up my own PAYE invoice a client directly and pay myself a salary. As I want to build up my business I can pay myself via PAYE in the same way as an agency does but cut out the middle man and earn more in total, all via PAYE.

    Doing things this way means I can pick up more work and gradually build my company up and so on then in time I am working for lots of people and not a contractor at all anymore.

    So my question is if I charge a client £120K per annum + VAT and pay myself the same salary adjusted for employers NIC and pension how does that work with the changes coming along, if I can show that I am paying PAYE do the IR35 deductions not need to be made?

    So sort of can I be my own umbrella company?

    Thanks
    Last edited by technobabble; 18th January 2020 at 05:38.

  2. #2

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    After April, on an inside contract, you will receive payment net of all deductions. So you can raise £120k + VAT and they'll take PAYE and NI off the £120k before they pay it over to you. They ought to still pay the full VAT.

    You will have all the costs of running the limited company but will have none of the CT allowances to offset those costs.

    But you'll have no CT bill as you won't be making a profit, most likely you'll be making a loss, which begs why bother having a Ltd Co.

    Stick with the Umbrella for now but do check going forward on post-April gigs that you're not being stung for Employers NI and Apprentice Levy as that shouldn't be paid by you.

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    Default Agency markup

    Thanks ladymuck for your comment, I understand that if the company deducts PAYE/NIC that is no different than if I do from my own company and then I have the costs of running doing that. But my question is what about the agencies markup.

    As an example Agency charges £150K to client but my cost to them including NI is £120K so they make £30K profit. If I dealt with the end client directly I could charge £150K. So in that scenario I would be better off by £30k less the 40% tax

    I spoke to one agency yesterday and we talked about a role in central London, Agency was discussing paying me £550 per day via my own company (not setup yet so I couldn't agree) but charging their client in turn £750 per day - so a straight markup of £200 per day for the agency.

    That's what I meant by middle man.

    What I was trying to ask is that if I am on PAYE of my own does IR35 apply, because the issue then is only whose PAYE I am on and not that Income Tax and NI are being deducted.

    I can understand why Government wants to bring in IR 35 as it you are self employed rather than on PAYE the tax rules and take home pay is very different, but with Agencies and PAYE the question is more about markups as everything gets taxed which relates to the workers payments.
    Last edited by technobabble; 18th January 2020 at 05:45.

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    Were you given a list of umbrellas by your existing agency? Was YourCo on that list?

    What makes you think that YourCo will be able to make the next list?

    And what happens if your employer isn’t on that new list.

    Btw, contract-hopping in this way might not be quite as easy as it was back in the good old days.

    (And your example above will only last until April when the new rules come in, then your Ltd will only be useful for outside contracts if you can get them.)
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    Quote Originally Posted by technobabble View Post
    I've been out of the UK for 12 years now back in London and working again. I've just got my first role via an agency and I'm on their payroll under PAYE which is fine as I have a full personal allowance and are actively looking for a new role. I've now gotten a better role starting next week which is also via PAYE I was offered the option of being paid via my own ltd by the agency but I'm not ready yet.

    I am setting up a new company of my own as in the long term I want to offer technology solutions to different businesses, but at the moment I need to work to pay the bills and to be able to invest in the product area I am interested in and so on.

    I don't have the company registered yet, so no bank account or insurance or anything setup yet.

    I understand now about IR35 and being in or outside, that the employer now needs to make the determination after April and the % difference I need to charge if insider or outside so I am in no different a position etc.

    What I am less clear on is what the difference is if I set up my own PAYE invoice a client directly and pay myself a salary. As I want to build up my business I can pay myself via PAYE in the same way as an agency does but cut out the middle man and earn more in total, all via PAYE.

    Doing things this way means I can pick up more work and gradually build my company up and so on then in time I am working for lots of people and not a contractor at all anymore.

    So my question is if I charge a client £120K per annum + VAT and pay myself the same salary adjusted for employers NIC and pension how does that work with the changes coming along, if I can show that I am paying PAYE do the IR35 deductions not need to be made?

    So sort of can I be my own umbrella company?

    Thanks
    You dont seem to be grasping the concept of what these new interpretation of IR35 in the private sector means. You seem to think you have a 'real' choice, can just set up your own umbrella co and even going insofar as raising your own 'PAYE invoice,' whatever that is.

    You havent got these choices. It's either PAYE or a recognised Umbrella if the client doesnt want to engage limited co contractors or is risk averse and determines you IR35 caught.

    You cannot just morph any limited co into an Umbrella or as I suspect you think, set up a limited co and say that is 'your umbrella.'

    You're also pre supposing any client is going to simply 'cut out' the middle man and you trouser the 'middle man's' fee in yourwage \ rate because it saves the client a bit of money.
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    Default Private sector

    Quote Originally Posted by BolshieBastard View Post
    You dont seem to be grasping the concept of what these new interpretation of IR35 in the private sector means. You seem to think you have a 'real' choice, can just set up your own umbrella co and even going insofar as raising your own 'PAYE invoice,' whatever that is.
    Bolshie you are right in, I've been away for a long time and I am using this forum to get up to speed, the agencies I am talking to in London hardly even mention IR35 they just ask for my day rate and if I have my own company setup.

    I missed a "," after PAYE hope that helps readers to understand my babble...

    I only returned due to my visa expiring and sort of wanted a change after a long time in the sun, I might go back offshore if my earnings potential is overly limited, I was earning around between $100,000 and $140,000 tax free with the occassional bonus on top, so I really need a high paying role so far I've only had traction around the £80K mark via PAYE and talk of a day rate of £550 which is closer but not that attractive if via an umbrella.
    Last edited by technobabble; 19th January 2020 at 15:02.

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    Quote Originally Posted by technobabble View Post
    I was earning around between $100,000 and $140,000 tax free with the occassional bonus on top, so I really need a high paying role so far I've only had traction around the £80K mark via PAYE and talk of a day rate of £550 which is closer but not that attractive if via an umbrella.
    Dream on.
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    Default Dream

    Quote Originally Posted by KinooOrKinog View Post
    Dream on.
    Well my target rate is £700 per day, which would leave me in a similar after tax position, guys in my niche earn a lot more than that in the US and are in demand.

    I am getting enquiries at £550 just not yet above that and the agencies would charge me out at £750 keeping £200 as there slice so clearly it is doable.
    Last edited by technobabble; 19th January 2020 at 15:15.

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    Quote Originally Posted by technobabble View Post
    Well my target rate is £700 per day, which would leave me in a similar after tax position, guys in my niche earn a lot more than than in the US and are in demand.

    I am getting enquiries at £550 just not yet above that.
    It's kind of irrelevant what you can earn in the US. You're not in the US. If all the enquiries/calls you're getting are at the 550 mark then that's the market rate for your role, regardless of what you need/want.
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  10. #10

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    Quote Originally Posted by KinooOrKinog View Post
    It's kind of irrelevant what you can earn in the US. You're not in the US. If all the enquiries/calls you're getting are at the 550 mark then that's the market rate for your role, regardless of what you need/want.
    Fair point. What I am finding is that it is tough to find agencies that understand my niche and therefore the value of what I can offer. As you say the US is a different and far bigger market.

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