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Umbrella Company

“Which operating method is best for me?”

August 24, 2018 | By | No Comments

Good afternoon,

Is everyone looking forward to the bank holiday weekend? Although this is now our last bank holiday until Christmas! If you have any plans, let us know in the comments below.

This week for the blog, we will be looking at the different types of operating methods that can be used when contracting. We covered this back in early 2017, although we continue to get a number of questions from candidates, asking which method can they use and what does it involve etc. so we thought we would put out an updated version for any new contractors or anyone who would like a reminder.

There are three different operating methods that are available when contracting, which are: using your own Limited Company, using an Umbrella Company, or going the PAYE route. There is a slight difference on what operating method you can use depending if your contract has been confirmed inside or outside IR35. If your contract has been deemed outside IR35, this means you can choose whether to go the Limited company, Umbrella company, or PAYE route. If your contract has been deemed inside IR35, you are only able to choose from using an Umbrella company or PAYE. Always check on the job posting or with the recruiter what methods are on offer, as there are some departments that may have slightly different terms and will only accept the PAYE route, although this doesn’t happen very often.

Below is a brief description of each operating method and what is included in each.

 

Limited Company

Operating under your own Limited (LTD) company requires you to have your own business and a business bank account. The main benefits of operating as a LTD company is that it is the most tax efficient method as a contractor. This is due to the way that the income is handled for a business as compared to a direct employee of a company which overall saves money. Operating through a LTD company comes with a level of paperwork and planning which must be undertaken. Quite a few tasks can be offset to an accountant which is generally recommended when operating as a LTD company. An accountant can also help with the initial setup of the business as well as managing ongoing accounts and Taxes.

 

Umbrella Company

Operating through an Umbrella company essentially means becoming an ‘employee’ of a third-party company who bills the client of the contract. This is a relatively hassle free option for a contractor as the payments received from the Umbrella company would have been subjected to Tax and NI prior to receiving it. As a new contractor this is a quick method to start as there is no setup time like there is for a LTD company.

The main downside of operating under an Umbrella compared to a LTD company is that you take home less pay and there are fees for using an Umbrella company. Though with the update to IR35 this option is quickly becoming the best paid option for roles that are in scope of IR35.

 

PAYE

Operating under PAYE is essentially becoming an employee of the agency that you are taking the contract with and the employer deducts tax and national insurance contributions from your wage. PAYE is the most hassle free of the three operating methods as you do not need to do any paperwork as when you receive your payslip, everything is done for you. Although you receive additional benefits by going PAYE, most contractors prefer to use an Umbrella Company or going through their own Limited company as they will receive a higher income.

 

I hope the above has given an insight into the three different types of operating methods and has given you an idea on what each one offers. If you have any questions on the above, leave us a comment, drop us an email or give us a call and one of the team will be happy to have a chat.

Have a great bank holiday weekend!

Warm regards,

Sheree

 

Umbrella Company Owners Jailed for Massive Payroll Fraud

June 23, 2017 | By | No Comments

We are coming to the end of a very warm week, luckily for our office, we have Air Conditioning to keep us cool. I hope that you all have had a way to keep cool under this strong summer sun, if not, you may be like me and letting out a sigh of relief as it gets a little cooler.  Moving swiftly on from the weather onto the actual topic for the blog this week, we are looking at a particular Umbrella Company and its unscrupulous owners.

The trio of directors, at the Umbrella Company Quality Premier Services, were jailed for almost 30 years between them for carrying out Payroll Fraud to the tune of a whopping forty five million pounds!  The directors, Geoffrey, Joshua, and Andrew, were keeping hold of VAT that was paid to them by recruitment agencies. Now, we all know VAT is supposed to be passed on to the HMRC but apparently that slipped their mind. And then not only did they fail to pay VAT but from 2009 until 2015 they only managed to pay £15,930 in tax. Wow.

The initial enquires were into the younger director, Joshua, after information was passed to the Essex police. It probably didn’t help his case when he posted an image on Social Media posing next to 6 luxury cars (Including a Lamborghini valued at £165,000). The initial investigation found that over the span of 2013 and 2015 over £10m was transferred into his account.

To have a little foray into what they were spending all that money on, aside from the luxury cars. Geoffrey bought four homes in England and Spain with a combined value of £3m, £300,000 on private jet flights to Spain, along with owning several race horses. Joshua’s collection of cars was worth £1m and within his home they found 10 watches with a combined value of £400,000. Andrew purchased four homes for just under £1.4m and six luxury cars.

It’s because of situations like this that you should double… no…triple check that your Umbrella Company is kosher and working above board, as the old saying goes, “when something is too good to be true, it probably is”.  A former tax official had this to say on the matter: “I’ve always thought it impossible that companies which charge £15-£30 per worker could pay huge kickbacks for referrals and offer 30 day credit terms without dipping into the VAT held on account, “ she said. “It seems that some of the cases coming to light are even worse than that.”

We allow our Contactors to use whatever umbrella company they wish to use, just make sure that you are using one that is safe and trusted. If you are not with an umbrella company at the moment and would like to be, we recommend our partner Parasol. They are a multi award winning umbrella company who have worked with a range contractors and agencies. If you would like to know more, let us know and we can pass your details onto our contact at Parasol.

Cheers,

Dan

Sources: https://www.essex.police.uk/news/brought-to-justice/trio-jailed-for-%C2%A345million-tax-fraud/

http://www.contractoruk.com/news/0013059umbrella_bosses_jailed_45m_paye_swindle.html