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IR35 / Umbrella Companies

IR35 / Umbrella Companies

Client subject to IR35. Has been recommended to go through an "umbrella" company. Any experience of these?
From what my client tells me, it appears they pretty much just work out the tax and nic and charge about £28 per week for this.
Isn't it just cheaper to work it out for ourselves?
Am I missing something? Sorry if this sounds a dense question; never had experience of this before.
Many thanks
PS Also, any experience of the PCG contracts etc.. for IR35.?


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By yeboyye
27th Feb 2005 10:10

composite rate tax
This question may have solved a recent query that I came across.
A friend had a client who maintained that he was "in the composite rate tax scheme". Neither of us had heard about this apart from something way back in my mind relating to building societies many years ago.
My friend contacted the company who were advising the client and the company proved to be less than helpful with the tax details of their scheme.
The umbrella company you speak about may have been what we had met up with.

Thanks (0)
17th Feb 2005 16:49

Misleading claims of lower taxes
There has been quite a lot of debate on other websites about umbrella companies, some of whom are keen on the marketing "spin" of being able to claim more expenses under an umbrella than under the IR35 rules using dispensations (basically claiming that expenses allowed are higher because dispensations are used rather than the actual costs incurred). Other "spins" may relate to offshore arrangements, employee benefit trusts, special class of shares issued for each contractor, foreign currency loans, and just about anything else you can imagine that sounds plausible to the gullible!!

The idea of the umbrella is that the contractor becomes an employee of the umbrella, so doesn't need his own company. Contractor sends timesheets to umbrella who submit invoices, get paid and then pay a wage to the contractor, TOGETHER WITH, expenses, loans, dividends or whatever else the set-up allows. Benefit to contractor is not having the hassle of using their own company, not keeping receipts, not doing book-keeping, not doing VAT returns, not doing own payroll etc.

I've never been convinced that there is anything "legal" the umbrella companies can do better/cheaper. In my opinion, the expenses to be claimed (dispensation or not) are the same either way (usual Sch E rules to apply). They would only be a benefit if the contracting period was short term and costs of own ltd co would therefore be out of proportion.

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17th Feb 2005 14:20

Marketing opporunity
Its just a way of selling unneccessary services to vulnerable clients.

Either they are within IR35 in which case they just have to take a sensible salary from their company which you can work out, or they are not...

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18th Feb 2005 10:44

Taxation 17 February 2005
Clearly a topical subject. Yesterday's taxation magazine contains an article by Kevin Miller dealing with this subject. He reveals that the Revenue have two dedicated teams based in Sheffield and Tauton targeting such companies. Well worth a read.

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By Anonymous
17th Feb 2005 17:58

Thank you. That was how i felt too. I appreciate your comments.

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