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)
Please login or register to join the discussion.
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.
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
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!
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.
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?