Client going from Ltd Co to Umbrella - really?

Client going from Ltd Co to Umbrella - really?

Didn't find your answer?

I thought I understood HMRC's direction of travel with IR35, clearly I don't.

A client has just told me that 'they' are closing the ltd co and going to umbrella.

The ltd co has been caught by the new public sector body regulation. Fine - this decision has been taken by the PSB.

So how can it be possible that the umbrella arrangement will allow to 'them' to claim travel and subsistence?
Apparently because they are not under supervision direction and control.

It seems that in order to remove a claim for travel and subsistence, HMRC have completely failed, and only succeeded in closing down a PSC ltd co and handing the work to the umbrella company.

Replies (10)

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By marks
29th Mar 2017 20:46

I have a few clients the same. Closing their own Ltd Co and now going to be operating through umbrella company.

As I understand it the umbrella company will effectively treat them as an employee and deduct PAYE/NIC from their income. They also wont be able to claim any costs eg travel/subsistence/insurance etc.

Only difference really is in what they will be charged. The umbrella company will charge them something like £30 - £50 per month for administering everything compared to me charging them £100 per month to do their year end accounts, CT return, confirmation statement and personal tax return.

So understandable why they are looking to move to umbrella company as works out cheaper than running through their own Ltd Co.

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blue sheep
By NH
30th Mar 2017 07:25

Yes, I have a few clients doing this, in each case it has not been by the clients choice, it has been the agency that has given them no alternative

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By Gone Sailing
30th Mar 2017 09:19

Whilst I can possibly match on price for an IR35 'one-liner' accounts and tax, I really don't understand, in my client's case, why they can carry on claiming travel and subsistence.

By the way, umbrella companies quote an "after tax" fee so it's 20% cheaper straight away. Clever.

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By JCresswellTax
30th Mar 2017 09:56

So let me get this straight - your client has been told by the public sector body that he is caught by IR35.

So he decided to move to an umbrella company. Fair enough so far.

However, he has then been told he can claim travel expenses as he isn't subject to SDC?

So he is caught by IR35, but not caught by SDC, which are actually stricter tests?

What a load of bullshit!

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By Gone Sailing
30th Mar 2017 10:06

I'm thinking that the allegedly allowed travel and subsistence would be when going to various sites and away from the PSB offices, and there is potential for confusion there.

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By Gone Sailing
30th Mar 2017 10:08

The other point about the PSB saying IR35, is that it is a lazy decision, implemented across the board.

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By stratty
30th Mar 2017 10:47

I agree that the proposed T&S expenses will be for inter-site travel and not commuting. That is of course assuming the payroll company in question understands the rules and are enforcing them appropriately.

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By Jules1234
30th Mar 2017 12:08

I have found that with my clients in the same situation, that agencies are recommending Umbrella Companies, as the employers national insurance is deducted from the Contractor, aswell as their own tax and NI. Whereas, if IR35 workers put their income through their own Ltd Company, the agency has to pay the employers NI. So is it really cheaper to go through an Umbrella if the Contractor has a choice? Not sure if this is the same for all Umbrella Companies?

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Replying to Jules1234:
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By Gone Sailing
30th Mar 2017 12:19

Thanks for explaining why it's in the agency's interest to move client to umbrella, I had missed that. More sums needed.

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By EstherG
31st Mar 2017 21:45

Not to mention the kick backs the agencies get from the brollies!!!

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