Umbrella contractor considering going Ltd Co?

A question about : Umbrella contractor considering going Ltd Co?

Hi All,

Apologies if this is in the wrong forum, I wasn't sure between this and the Cutting Tax but figure as the primary reason for considering this is to boost my income that this was the best place for it

I'm currently working as an Umbrella contractor. I am conracted to a client by my (Engineering) Recruitment Agency and I log my hours and expenses with, and am paid by an Umbrealla company. For tax calculations I am considered a PAYE employee of the umbrella company. I have considered going Ltd Co for a while given the financial benefits, however the extra effort of doing my own tax returns etc haven't been worth the benefits in my opinion so I've been happy staying as Umbrella.

However, my Umbrella company recently informed me that they offer a fully inclusive service for Ltd Co contractors. They kindly did a projection for me based on my currently hourly rate and hours worked and in that example, my take home was 20% more than it is currently so it;s gotten me very tempted. I'm aware that month to month the actual amount may change but before I take the plunge I want to understand things more.

The umbrella company have offered this service for a Ј100+VAT setup fee, and then a Ј100+VAT a month fee (this increases to Ј125+VAT a month if you want to include Public Liability and Employers Ins). My understanding is this covers everything so there would be no extra hassle for me (I value my time and being stress free more than saving say Ј50 a month on fees) but there are a few questions I have:

I log my hours and expenses onto an online portal, which would continue if I used this same company. Therefore I presume those are the records needed for them to do tax returns?

I've been told by a fellow Ltd Co contractor that there are 4 things involved with Ltd Co tax:

1. Corporate Tax Returns
2. VAT Returns (This only applies over Ј70,000 I;ve read and I don't earn that much, so is this an issue?)
3. Each April a payroll year end needs to be done?
4. Personal Tax return, needs to be done end of January...whats involved with this or would the above be contained with the 'all inclusive' service?

Finally, is there anyone on here who is Ltd Co with an Umbrella company who can give the good and the bad points?

Many thanks, Tax just confises me which is why I leave it to the experts!

Best answers:

• May be ask here
  https://forums.moneysavingexpert.com/...splay.php?f=22
  Also if you use the search, there are some topics, one is below
  https://forums.moneysavingexpert.com/...ractor+company
• Speak to an accountancy that specialises in contracting too. I pay Ј1,000 +VAT per year for payroll (2 employees), annual company and personal returns and VAT. Plus any companies house charges at cost, think is Ј20 a year or something minimal. Set up was done for free by them
  VAT is normally beneficial for you to register for even if you are below the requirement as your clients are presumably VAT registered so your day rate will be Ј200 or Ј200+VAT and it makes no difference to them. Assuming your expenses are minimal you join the flat rate scheme and so dont have to mess about reclaiming VAT but instead give a flat rate percentage to HMRC leaving you with a couple of percent extra profit.
  The portal should generate an invoice and thats what you'd need along with your companies bank statements, receipts for expenses etc.
  Ј25/month for EL and PL is a con, it is the PI that you need for your clients and where the cost is. EL is not required by you as you have no non-family employees and PL for an office based contractor really should be under Ј30 per year when bolted onto a PI policy.
  Some of these giant companies are very liberal when it comes to saying what you can deduct as expenses etc but leave you on your own if HMRC come knocking.
  The issue with going Ltd is IR35 and the liabilities that may materialise if you do the normal of low salary, high dividends but HMRC decide in 5 years time that you were inside IR35 and so back tax is due plus fines.
• Speaking from personal experience, I'd go Ltd. every time. Myself and my colleagues are all working on a contract basis, some of us chose to set up our own Ltd companies, some went with an umbrella. My friend is paying Ј95 a month to the umbrella company for their services, I pay my accountant Ј560 a year - I'm sure you can do the sums yourself
  If you're a one-man-band it's very easy. I just keep a spreadsheet of income and expenses, send these off to my accountant once a year, he sends my accounts off to HMRC, then I get a bill for the tax. It's pretty easy to estimate what the tax bill is going to be, so I just put money aside each month into a separate account, then it's ready for when the bill arrives.
  If you can find a decent accountant to look after the accounts for you, then I would say a Ltd. Co. is very easy option.
  Just to add - you don't have to have an accountant, you can do everything yourself. But personally, for what he charges I think it's worth it to make sure everything is done by the books, and I can sleep easy without expecting a knock on the door from the tax-man
• As in IT contractor I pay Ј80 plus VAT per month for my accountant to prepare accounts for my limited company and my personal income tax return. I know others who play slightly less than that.