Ltd or umbrella

[SLCZ3]

Ok then,returning to UK and contracting to a large oil related international company, what are the advantages/disadvantages of using my own Ltd company, as opposed to going with an umbrella organisation.
Thanks for all comments to come.

[Eric Mc]

1st comment - have you searched PH for similar questions? It is asked on average once a week.

[SLCZ3]

Eric Mc said:

1st comment - have you searched PH for similar questions? It is asked on average once a week.

Yes i have, and have not been able see the specific advantages between the two highlighted, but if you can point me in the right direction/link that would be appreciatted.

[ewenm]

High level summary:

Umbrella - less admin, less take-home
Ltd - more admin, more take-home

The admin burden of a small ltd company isn't very high though. I went with an umbrella when i first started contracting but should have just set up a ltd company. Beware umbrella companies using complicated off-shore trust schemes (IIRC).

[Zaxxon]

I'd say Ltd, but only if you have a good accountant. If dont have a good accountant then it can be a very miserable experience.

Although a friends umbrella co went under (did a runner) leaving him without the £24,000 he was owed.

[Eric Mc]

It's just that so many of the points have been covered over the years on here.

The main advantages of an umbrella are that you don't need to worry about the admin but it will cost - both in admin fees and more tax and NI. As always, some umbrellas are better than others and some take more risks in pushing the tax boundaries. You need to be careful who you go with.

Setting up your own limited company gives you more control over your affairs and will cost you less - both in professional fees and more than likely in tax and NI terms too. However, it is vital if you go down this route that you -

a) are prepared for the additional burdens of compliance and bureaucracy
b) find a good accountant to help you
c) know and understand your legal responsibilities as a comnpany director
d) be fully aware of the implications of the HMRC IR35 rules and take all steps necessary to protect yourself as best you can from IR35 issues

Hope that helps.

[SLCZ3]

Thanks for the info chaps, i have had my own Ltd in the past, but there have been alot of changes since then such as the appearence of umbrella companies and just wondered if there was any significant advantage one way or the other, such as the IR35 compliance and detail of documentation.
Again thanks

[Mr POD]

Ltd, and Vat registered on a float rate, will be more profitable.

The admin should be simple, enough.

[Eric Mc]

Mr POD said:

The admin should be simple, enough.

Famous last words.

[ujio]

I'm using an Umbrella right now.
To be honest I am not sure if it's worth it until I crunch through a few numbers at the end of the month.

Using an online salary calculator it look like I am getting paid less in the umbrella than I would as PAYE!! And that's before all the expenses factored in.

I think this might have to be something to do with the Employers NI Contribution being deducted from the gross salary.

Read the small print.

[SLCZ3]

Yes the NI is something i need to look into as i am fully paid up from my side on that.

[ODJ]

I assume you are going through an Agency? It may be worth asking them about their AWD complience plans as that could be a factor for you - do you really want to be getting paid for 1 hour at minimum wage and the rest as a bonus? That is the route alot of misguided agencies are heading down.
For LTD make sure you use a accountant that is used to PSC's.Flat rate VAT is a bonus but LTD will always involve additional admin for you. The accountant CANNOT manage the process for you, however a firm familiar with PSC's will have systems in place to make it much easier.
For umbrella be weary of bold claims of 85% retention etc.All companies if opperating correctly, should offer you the same take home. Just make sure you use a reputable firm ideally one run by accountants rather than payroll companies. There are a few comparision sites for Umbrella companies and various bodies but most are owned by the bigger companies i.e Parasol.
Feel free to drop me an email @ [e-mail]. My role is dealing with agencies for both Ltd and Umbrella so I can be pretty impartial for contractors.

[Mr POD]

Eric Mc said:

Mr POD said:

The admin should be simple, enough.

Famous last words.

It should be, but then you meet Colin, the procrastinating problem.

How can my simple accounts cause him so much grief.?

52 Invoices, 52 payments to me all by Bacs
4 Vat Payments out
4 NIC/PAYE payments out
52 Expences Payments, all itemised and receipts numbered all by Bacs

24 salary payments by BACS
All other payments recorded, all receipts numbered all done by Bacs or Visa Debit
No cash payments or takings.

He has 2 rules.

Always wait til it's just too late and then ask questions that are answered in the last email in the FIRST fkING BULLET point.

[Eric Mc]

You know what to do.

[poloprincess]

best place to go is www.contractoruk.com - massive contractors forum which will give you loads of help and advice. I use sjd accountancy (www.sjdaccountancy.com) - they're pretty good so if you do go ltd give them a call

[exhaust ed]

I have done Ltd in the past. Much better for tax efficiency and the hassle was Ltd (excuse the pun). Likewise I have used SJD Accountancy who did a decent job.