Temping agency that wants OH to join Umbrella agency?
Discussion
A large temp agency in London has asked my OH to come and do an interview and asking her about the wages she will accept.
No probs me thinks... However one of the questions the agency has asked is:
Was she willing to join an umbrella agency for their contractors that takes care of contractors for XXXX?
Hmmm... this means they are not paying them direct and she has to fork out XXX per month for the pleasure of being paid from this umbrella agency (I bet they have a share in it)...
So to limit her costs, can she tell them not to use the umbrella agency and instead use my Ltd and XXXX agency pay me and I pay her?
My accountant is sunning himself and cant answer at the moment so I would like the pros and cons of doing this and using my company who wouldn't charge my OH anything over using the umbrella agency.
I take it I would need to change my insurances to cover the OH?
No probs me thinks... However one of the questions the agency has asked is:
Was she willing to join an umbrella agency for their contractors that takes care of contractors for XXXX?
Hmmm... this means they are not paying them direct and she has to fork out XXX per month for the pleasure of being paid from this umbrella agency (I bet they have a share in it)...
So to limit her costs, can she tell them not to use the umbrella agency and instead use my Ltd and XXXX agency pay me and I pay her?
My accountant is sunning himself and cant answer at the moment so I would like the pros and cons of doing this and using my company who wouldn't charge my OH anything over using the umbrella agency.
I take it I would need to change my insurances to cover the OH?
If you use your own companty, you would need to ensure that her business activities are covered by the Memo and Articles of the company.
Also, for Corporation Tax purposes, you would need to ensure that what she is doing does not constitute a separate trade to what you do.
Finally, your company would need to ensure that her contracts arer IR35 compliant.
If she is using an agent (as appears to be the case), she will need to acquaint herself with the facts and decision of the Dragonfly Case which is extremely relevant to contractors who work through agents.
Also, for Corporation Tax purposes, you would need to ensure that what she is doing does not constitute a separate trade to what you do.
Finally, your company would need to ensure that her contracts arer IR35 compliant.
If she is using an agent (as appears to be the case), she will need to acquaint herself with the facts and decision of the Dragonfly Case which is extremely relevant to contractors who work through agents.
i own an agency that utilises an umbrella organisation.
In short, it's not a con of any sort, it is HMRC compliant (unless they are using a mickey mouse Payroll Co. - unlikely)
You can certainly invoice the agency, but you will need to make account of your PAYE and NI contributions, which can be a faff, and there will almost certainly be extra accounting costs at the end of the year, but you may well be slightly better off this way, it just depends how much faff you are willing to accept. Also, some agencies treat contractor invoices the same as any other supplier invoice, so they can legitimately hold back on payment for a couple of weeks, whereas the payroll stuff is dealt with in a couple of days.
Depending on rate and frequency of work, and assuming that she claims for all relevant and legal expenses, she will almost certainly be better off than bog standard PAYE with the umbrella method.
HTH
Greg
In short, it's not a con of any sort, it is HMRC compliant (unless they are using a mickey mouse Payroll Co. - unlikely)
You can certainly invoice the agency, but you will need to make account of your PAYE and NI contributions, which can be a faff, and there will almost certainly be extra accounting costs at the end of the year, but you may well be slightly better off this way, it just depends how much faff you are willing to accept. Also, some agencies treat contractor invoices the same as any other supplier invoice, so they can legitimately hold back on payment for a couple of weeks, whereas the payroll stuff is dealt with in a couple of days.
Depending on rate and frequency of work, and assuming that she claims for all relevant and legal expenses, she will almost certainly be better off than bog standard PAYE with the umbrella method.
HTH
Greg
Greg_D said:
i own an agency that utilises an umbrella organisation.
In short, it's not a con of any sort, it is HMRC compliant (unless they are using a mickey mouse Payroll Co. - unlikely)
You can certainly invoice the agency, but you will need to make account of your PAYE and NI contributions, which can be a faff, and there will almost certainly be extra accounting costs at the end of the year, but you may well be slightly better off this way, it just depends how much faff you are willing to accept. Also, some agencies treat contractor invoices the same as any other supplier invoice, so they can legitimately hold back on payment for a couple of weeks, whereas the payroll stuff is dealt with in a couple of days.
Depending on rate and frequency of work, and assuming that she claims for all relevant and legal expenses, she will almost certainly be better off than bog standard PAYE with the umbrella method.
HTH
Greg
Greg, I'm a bit surprised at your reply. The agency will make more (and the contractor less) from an umbrella vs ltd company. Also, your comment in bold is, frankly, gobsmacking. I have NEVER encountered this and neither have any contracting colleagues. I certainly hope you don't use that spiel to sell your umbrella to unsuspecting contractors.In short, it's not a con of any sort, it is HMRC compliant (unless they are using a mickey mouse Payroll Co. - unlikely)
You can certainly invoice the agency, but you will need to make account of your PAYE and NI contributions, which can be a faff, and there will almost certainly be extra accounting costs at the end of the year, but you may well be slightly better off this way, it just depends how much faff you are willing to accept. Also, some agencies treat contractor invoices the same as any other supplier invoice, so they can legitimately hold back on payment for a couple of weeks, whereas the payroll stuff is dealt with in a couple of days.
Depending on rate and frequency of work, and assuming that she claims for all relevant and legal expenses, she will almost certainly be better off than bog standard PAYE with the umbrella method.
HTH
Greg
hornetrider said:
Greg_D said:
i own an agency that utilises an umbrella organisation.
In short, it's not a con of any sort, it is HMRC compliant (unless they are using a mickey mouse Payroll Co. - unlikely)
You can certainly invoice the agency, but you will need to make account of your PAYE and NI contributions, which can be a faff, and there will almost certainly be extra accounting costs at the end of the year, but you may well be slightly better off this way, it just depends how much faff you are willing to accept. Also, some agencies treat contractor invoices the same as any other supplier invoice, so they can legitimately hold back on payment for a couple of weeks, whereas the payroll stuff is dealt with in a couple of days.
Depending on rate and frequency of work, and assuming that she claims for all relevant and legal expenses, she will almost certainly be better off than bog standard PAYE with the umbrella method.
HTH
Greg
Greg, I'm a bit surprised at your reply. The agency will make more (and the contractor less) from an umbrella vs ltd company.In short, it's not a con of any sort, it is HMRC compliant (unless they are using a mickey mouse Payroll Co. - unlikely)
You can certainly invoice the agency, but you will need to make account of your PAYE and NI contributions, which can be a faff, and there will almost certainly be extra accounting costs at the end of the year, but you may well be slightly better off this way, it just depends how much faff you are willing to accept. Also, some agencies treat contractor invoices the same as any other supplier invoice, so they can legitimately hold back on payment for a couple of weeks, whereas the payroll stuff is dealt with in a couple of days.
Depending on rate and frequency of work, and assuming that she claims for all relevant and legal expenses, she will almost certainly be better off than bog standard PAYE with the umbrella method.
HTH
Greg
the agency still pays the gross amount regardless, so no difference, the contractor is balancing the faff of doing all their own accounting with effectively paying someone else to do it, as i mentioned earlier Also, your comment in bold is, frankly, gobsmacking. I have NEVER encountered this and neither have any contracting colleagues. well, i have heard about it a lot in the education sector I certainly hope you don't use that spiel to sell your umbrella to unsuspecting contractors.nope, the figures on the real life worked examples sell it to them. and for clarity, i don't withhold payment for invoice people
Greg
edit: i have just looked up the dragonfly case and it is a typical IR35 argument, and tbh, i think hmrc have a point, he was a hidden employee. I struggle to see your point in relation to payroll services eric.
Edited by Greg_D on Thursday 4th March 09:28
Anyone who operates an agency or any limited company contractor who makes use of an agency needs to know and understand the implications of the Dragonfly case.
Dragonfly Consulting Ltd was a typical one man band type IT company. The proprietor, a Mr Bessell, found work through an agency (known as DPP) and was performing the bulk of the work for the AA in Basingstoke. His contract with the AA was pretty much IR35 proof - as was his conttact with DPP. What WASN'T IR35 proof was the contract between DPP and the AA. Apparently, DPP used the same general contract with its clients for any staff, whether the staff were going to be properly employed under the PAYE system or the "staff" were operating through their own limited companies.
HMRC seized on this, stating that there was no difference in essence between the type of "temps" DPP were supplying to their clients, whether they were individuals or limited companies. Therefore if an individual was operating through their own limited company, IR35 HAD to apply.
HMRC won their case and now Mr Bessell is having to find over £99,000 of underpaid tax and NI.
Dragonfly Consulting Ltd was a typical one man band type IT company. The proprietor, a Mr Bessell, found work through an agency (known as DPP) and was performing the bulk of the work for the AA in Basingstoke. His contract with the AA was pretty much IR35 proof - as was his conttact with DPP. What WASN'T IR35 proof was the contract between DPP and the AA. Apparently, DPP used the same general contract with its clients for any staff, whether the staff were going to be properly employed under the PAYE system or the "staff" were operating through their own limited companies.
HMRC seized on this, stating that there was no difference in essence between the type of "temps" DPP were supplying to their clients, whether they were individuals or limited companies. Therefore if an individual was operating through their own limited company, IR35 HAD to apply.
HMRC won their case and now Mr Bessell is having to find over £99,000 of underpaid tax and NI.
Eric Mc said:
Anyone who operates an agency or any limited company contractor who makes use of an agency needs to know and understand the implications of the Dragonfly case.
Dragonfly Consulting Ltd was a typical one man band type IT company. The proprietor, a Mr Bessell, found work through an agency (known as DPP) and was performing the bulk of the work for the AA in Basingstoke. His contract with the AA was pretty much IR35 proof - as was his conttact with DPP. What WASN'T IR35 proof was the contract between DPP and the AA. Apparently, DPP used the same general contract with its clients for any staff, whether the staff were going to be properly employed under the PAYE system or the "staff" were operating through their own limited companies.
HMRC seized on this, stating that there was no difference in essence between the type of "temps" DPP were supplying to their clients, whether they were individuals or limited companies. Therefore if an individual was operating through their own limited company, IR35 HAD to apply.
HMRC won their case and now Mr Bessell is having to find over £99,000 of underpaid tax and NI.
An interesting point. so, in essence, are HMRC suggesting that if an agency has 2 staff doing identical work that is ostensibly outside of IR35, one of whom is PAYE and the other runs their own tax affairs and claims mileage and subsistence as part of their own ltd co that the second person now falls inside IR35 merely because of the existence of the PAYE person. It seems a strange conclusion to reach!Dragonfly Consulting Ltd was a typical one man band type IT company. The proprietor, a Mr Bessell, found work through an agency (known as DPP) and was performing the bulk of the work for the AA in Basingstoke. His contract with the AA was pretty much IR35 proof - as was his conttact with DPP. What WASN'T IR35 proof was the contract between DPP and the AA. Apparently, DPP used the same general contract with its clients for any staff, whether the staff were going to be properly employed under the PAYE system or the "staff" were operating through their own limited companies.
HMRC seized on this, stating that there was no difference in essence between the type of "temps" DPP were supplying to their clients, whether they were individuals or limited companies. Therefore if an individual was operating through their own limited company, IR35 HAD to apply.
HMRC won their case and now Mr Bessell is having to find over £99,000 of underpaid tax and NI.
Greg
Not strange at all.
HMRC are implying that the key terms and conditions that exist are those between the agent and the businesses where staff and/or contractors are alloted. If all individuals are placed using a generic "one size fits all" type contract, then those who operate through their own limited company are now highly vulnerable to IR35.
Agents need to ensure that THEY have special IR35 friendly contracts in place with THEIR clients for those individuals they place who operate their own limited companies.
HMRC are implying that the key terms and conditions that exist are those between the agent and the businesses where staff and/or contractors are alloted. If all individuals are placed using a generic "one size fits all" type contract, then those who operate through their own limited company are now highly vulnerable to IR35.
Agents need to ensure that THEY have special IR35 friendly contracts in place with THEIR clients for those individuals they place who operate their own limited companies.
Eric Mc said:
Not strange at all.
HMRC are implying that the key terms and conditions that exist are those between the agent and the businesses where staff and/or contractors are alloted. If all individuals are placed using a generic "one size fits all" type contract, then those who operate through their own limited company are now highly vulnerable to IR35.
Agents need to ensure that THEY have special IR35 friendly contracts in place with THEIR clients for those individuals they place who operate their own limited companies.
i see, but if the employee is technically employed by a payroll company on a PAYE basis (as, technically they all are) and are merely allocated work by the agency, then they are alright. is that your take on it?HMRC are implying that the key terms and conditions that exist are those between the agent and the businesses where staff and/or contractors are alloted. If all individuals are placed using a generic "one size fits all" type contract, then those who operate through their own limited company are now highly vulnerable to IR35.
Agents need to ensure that THEY have special IR35 friendly contracts in place with THEIR clients for those individuals they place who operate their own limited companies.
Greg
hornetrider said:
Also, your comment in bold is, frankly, gobsmacking. I have NEVER encountered this and neither have any contracting colleagues. I certainly hope you don't use that spiel to sell your umbrella to unsuspecting contractors.
I started contracting in IT in 1998 and gave it up 3 years ago so feel qualified to respond to this - yes he's correct - I have experienced agencies withholding payments for invoices on plenty of occasions. I have also experienced agencies taking a 60% cut of the salary but that's another story altogether 
As for evading IR35, well if you play with fire then you're going to get burnt sooner or later. No sympathy for people exploiting loopholes and then bawwwwwwww because they owe backdated tax
itsnotarace said:
hornetrider said:
Also, your comment in bold is, frankly, gobsmacking. I have NEVER encountered this and neither have any contracting colleagues. I certainly hope you don't use that spiel to sell your umbrella to unsuspecting contractors.
I started contracting in IT in 1998 and gave it up 3 years ago so feel qualified to respond to this - yes he's correct - I have experienced agencies withholding payments for invoices on plenty of occasions. I have also experienced agencies taking a 60% cut of the salary but that's another story altogether As for evading IR35, well if you play with fire then you're going to get burnt sooner or later. No sympathy for people exploiting loopholes and then bawwwwwwww because they owe backdated tax
I am sure some agencies do take 60% where they can negotiate it, the are a business not a charity.
Ir35 does not apply to me as I am \ was not an employee, by definition or description, as are probably most of the contrators on here
Were you knowingly evading ir35 while contracting though, because the way you are writing it sounds like you think there is no choice.
Just my personal opinion, but your statement of feeling qualified to answer, feels like it falls a bit short really.
itsnotarace said:
I started contracting in IT in 1998 and gave it up 3 years ago so feel qualified to respond to this - yes he's correct - I have experienced agencies withholding payments for invoices on plenty of occasions. I have also experienced agencies taking a 60% cut of the salary but that's another story altogether
It's not your salary...A non-paying agency is a p**s poor excuse for using an PAYE umbrella though, as it won't help you one bit - in fact it will make it harder to get "your" money as there is a third party between you and "your" money, and they really won't care too much about it.
I know, because I've been there. You can be screwed if the agency doesn't pay the umbrella, as you have no grounds to pursue it yourself.
If you run your own Ltd company and the client is witholding payment and in breach of the contract with the their supplier (your Ltd) it is much easier to take appropriate action. I have experienced agencies not paying on time, and I have successfully pursued them through the legal system.
For the Benefits of Umbrella over Agency you might want to look at this so I am told
https://www.focusedconsulting.co.uk/FocusedPayRate...
https://www.focusedconsulting.co.uk/FocusedPayRate...
HIS LM said:
"Depending on rate and frequency of work, and assuming that she claims for all relevant and legal expenses, she will almost certainly be better off than bog standard PAYE with the umbrella method"
Thats what I was led to believe
That's Umbrella vs boggo PAYE though. Not Umbrella vs Ltd.Thats what I was led to believe
http://www.freestyleaccounting.com/contractors/con...
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