Been offered a job - question about umbrella companies.

Kristoph

Kristoph

Kristoph

Soldato
Joined
11 May 2007
Posts
8,303
Hi,

Just received an offer from a company for a 3 month temp to permanent role.

During these 3 months I'll be a contractor, and will have the option of either PAYE or using an umbrella company.

The way it's been put to me so far, is that going with the umbrella company allows me to offset some of my commuting expenses against my tax.

Now looking at the figures I've been sent through as a rough idea as to what to expect, it's about a £300 difference per month if go with the umbrella firm.

Does this seem odd or too good to be true? I've not been given all of the details yet, but I'm aware a few of you here are contractors and might be able to give me a few tips or warnings.


Thanks.
 
Last edited:
Sorry was just editing the original realised it was too vague. I thought the umbrella companies were now illegal sorry due to them not actually directly employing you thus tax avoidance. However I can't find any supporting articles yet so maybe I'm wrong.
 
http://www.sjdaccountancy.com/about/ourservices/umbrella_company/contractor_expenses.html

By claiming all appropriate allowances and expenses you can minimise your tax bill; however, this is not a way of avoiding tax.

Obviously receipts should be kept for all the expenses that you claim. Remember it is you the Revenue will investigate and not your umbrella company, be very cautious of companies who say you do not need to keep receipts and can claim for things you have never actually bought.

If you can't prove it, the Revenue will view it as tax avoidance.
Click to expand...


Travel

You can claim the cost of travel to and from your temporary place of work. This allowance is to cover fuel and running costs of the vehicle. You can also claim for parking and congestion charges.
Click to expand...
 
Like I said, I haven't got all of the details yet. This was just in a phone conversation earlier and I may have heard something incorrectly.

Hopefully someone can give me some info on pros and cons.
 
Last edited:
Mynight said:
Appears I was completely wrong my apologies. I thought they were similar to the one person ltd companies with a single source of income.
Click to expand...

No worries, I'm completely clueless to all of this and for all I know I might have been offered something that wasn't legit. :)
 
So you've been offered a job but they won't be employing you and expect you to work out some way of being self employed?

This is of course entirely normal if you are yourself a contractor but the fact you don't know any of this stuff makes me think somebody somewhere is taking advantage of you.
 
Kristoph said:
Hi,

Just received an offer from a company for a 3 month temp to permanent role.

During these 3 months I'll be a contractor, and will have the option of either PAYE or using an umbrella company.

The way it's been put to me so far, is that going with the umbrella company allows me to offset some of my commuting expenses against my tax.

Now looking at the figures I've been sent through as a rough idea as to what to expect, it's about a £300 difference per month if go with the umbrella firm.

Does this seem odd or too good to be true? I've not been given all of the details yet, but I'm aware a few of you here are contractors and might be able to give me a few tips or warnings.


Thanks.
Click to expand...

Up to you really, a LTD will only cost a hundred quid or so to set up, you won't reach the threshold for VAT and won't set up PAYE for that amount of time either. You can claim costs against the business and it's more tax efficient, however when the job goes permanent, you will have to do self assessment additionally as PAYE. An Umbrella basically works as your PAYE company, for three months, I'd go for the less hassle Umbrella option.
 
[TW]Fox;26577603 said:
So you've been offered a job but they won't be employing you and expect you to work out some way of being self employed?

This is of course entirely normal if you are yourself a contractor but the fact you don't know any of this stuff makes me think somebody somewhere is taking advantage of you.
Click to expand...

I got the job through a big engineering recruitment agency, who also look after the contractors for that company. So far it seems like they're being incredibly helpful and giving me all options. I think whilst I'm on the temp contract, I will be paid through the recruitment agency and the umbrella. But after those three months I'll be paid directly by the company on a PAYE basis.

bluesouljah said:
...
Click to expand...

I think that will be the option I go for, I don't want the hassle for 3 months worth of temp.
 
The fact they are offering either PAYE or the umbrella company would suggest IR35 would apply here and the advantages would be minimal/non-existent?

However I'm not an accountant so have no real experience in this.
 
The position I'm taking on is to help a fairly understaffed team, who have been trying to get someone taken on for quite some time. I think the position is only 3 months with the idea of taking on permanently because HR decided so, not the people who held the interview and need the staff.

I'd be without the benefits on a 6 month probationary period and still have the possibility of being dropped - I think it's probably its more convenient for the company to do it this way, should I turn out to be a massively incompetent waste of space.
 
RDM said:
The fact they are offering either PAYE or the umbrella company would suggest IR35 would apply here and the advantages would be minimal/non-existent?

However I'm not an accountant so have no real experience in this.
Click to expand...

IR35 would apply unless there was some sort of professional indemnity linked to the limited company. That would be the only way to get out of scope.
 
RDM said:
The fact they are offering either PAYE or the umbrella company would suggest IR35 would apply here and the advantages would be minimal/non-existent?

However I'm not an accountant so have no real experience in this.
Click to expand...

Yeah, minimal, the company would need to close after three months, unless made dormant, would have to file accounts. He would be a director and therefore subject to the CDDA act if he forgot about the company and didn't file. He'd have to run self assessment tax as well as PAYE for the tax year. The Umbrella would be the way to go. Surprised it doesn't go through the agency. Additionally, if he didn't set up PAYE, then he wouldn't have NI contributions for the period and if he did set up PAYE, he would have a different tax code.
 
Last edited:
You must log in or register to reply here.
Back
Top Bottom