Contracting through Umbrella Company

Volter

I have been given a job as a contractor for the next 6 months and I have been advised to get set up with an umbrella company.I am employed by an agency and they have advised me to be paid through their Umbrella Company.I am abit confused as what the Umbrella company does, They said something on the phone about paying less tax..
Anybody have any idea of rates they charge now and what expenses can you charge?

Any help will be greatly appreciated

docdolittle

/waits for eventual zombie post :rolleyes:

fyi: http://en.wikipedia.org/wiki/Umbrella_Corporation Just to get it out of the way :rolleyes:

Offy

I was an IT contractor for about five years and once I was told to get a contract with a company called IT Alliance I would have to set up an umbrella company. I looked into it and it looked like a company that did nothing but take a percentage of my income.
My advice is to set up a limited company with someone you trust and cut out the middle man.

The_Conductor

If you don't want the hassle of knowing the deadlines for tax returns and aren't great with the paperwork- they can be very helpful- but in general most IT contractors find them expensive and once they get to grips with the tax code etc- do their own paperwork.

I'm not aware of any tax savings from using an umbrella company (correct me if I'm wrong someone). Depending on how its structured, its possible that you may be set up as a PAYE employee- which has both costs and benefits associated with it.....?

Find out the details one way or the other.

eth0_

It depends on the type of work you're doing but unless you're doing a lot of travelling/expensing/invoicing for stuff, you can easily do it yourself.

I used CXC a couple of years ago and they were terrible...their incorrect advice meant I lost a load of money I could have claimed for my rent, they didn't pay enough PRSI for me, and they are actually outsourcing the people who do your accounts and tax - it's all done by people in (iirc) the Phillipines, who are no doubt paid peanuts for their work.

It's easy enough to setup your own company and do it all yourself tbh.

nyskjerrig

I've started a short term contract through IT Alliance, I don't use CXC because of their massive 5% fee. Instead I went through Icon Accounting http://www.iconaccounting.ie/ who charge a flat fee regardless of your daily rate and very good at following up etc.

HashSlinging

I use CXC and cannot recommend them highly enough.

Mrs OBumble

smccarrick wrote: »

Depending on how its structured, its possible that you may be set up as a PAYE employee- which has both costs and benefits associated with it.....?

This is quite an important point: if you've only got a short contract and it doesn't get extended, then you may find that you've lost entitlement to almost all welfare benefits because you've been self employed. Where as if they set you up as an umbrella-co employee, you have to pay the employer PRSI from your contract money, but you keep the "stamps" up.

It all comes down to how likely it is that you'll get another contract afterwards.

Sleepy

I'm currently working through an umbrella company in the UK.

In terms of the reduced tax bill - it's that your business related expenses (hotels, flights, mileage etc) are deducted from your salary before your Income Tax is calculated.

The chief advantage as far as I'm concerned is that an umbrella company allows you to keep your PAYE worker status while working as a contractor. If you want to contract long term, you're better off with your own Ltd company (as you can also save on VAT) but this would invalidate you from claiming social welfare if it doesn't work out (i.e. when your contract expires and you can't get another one).

Not all umbrella companies are that expensive. I'm currently paying £9.99 a week (which is also claimable as a business expense) to a company called nasa consulting, it's a far cry from the €300 or so per month which many of the Irish umbrella companies charge.

DeadParrot

I'm kinda going down this route at the moment.
Is going through a UK company always an option?

Thailand87

Sleepy wrote: »

I'm currently working through an umbrella company in the UK.

In terms of the reduced tax bill - it's that your business related expenses (hotels, flights, mileage etc) are deducted from your salary before your Income Tax is calculated.

The chief advantage as far as I'm concerned is that an umbrella company allows you to keep your PAYE worker status while working as a contractor. If you want to contract long term, you're better off with your own Ltd company (as you can also save on VAT) but this would invalidate you from claiming social welfare if it doesn't work out (i.e. when your contract expires and you can't get another one).

Not all umbrella companies are that expensive. I'm currently paying £9.99 a week (which is also claimable as a business expense) to a company called nasa consulting, it's a far cry from the €300 or so per month which many of the Irish umbrella companies charge.

Can you please show me an example of when an Irish Accountancy firm is charging you €300 a month! I am being charged €65 a month. You can not always run through an Umbrella company in the UK. I hate when people give the wrong advice and pretend they know what they are talking about, If you are not sure, call the Revenue and ask if you are allowed to run your finances via a UK company.

shoegirl

I'm sure there is an opening there for accountants to provide a similar service.

The advantage of the likes of CXC etc is that timesheets, expenses, forms etc are kept on online systems and they do the billing and VAT for you.

Depends on what you want from it really. From what I hear an accountant can do your books for a year but not sure what the charges would be for similar servies to what Prima/CXC provide. I think some folk like CXC because they do have an upper cap which works out if you are on a very high rate.

sartay

An accountant can only do it if you have your own company.

I dont know about that UK contracting thing - how can you save tax doing that? Would be interested to know for future ref if you can!

Umbrella companies should be hassle free. You get set up as an employee and they take care of everything else for you. In terms of sorting out your taxes it should feel the same as when you were a permanent employee. Like you get a payslip and you dont have to worry about sorting out your taxes or worry about VAT and all that. But the difference is that with umbrella companies you can also claim a lot of expenses which keeps your taxes down. The point of them is that its an easy way to be able to take up a contract position without too much hassle.

I looked into sorting out my own company at one point but Ive only had a few short contracts over the years between permanent positions so I didnt think it was worth doing. The main advantage of having your own company seemed to be that you can get away with claiming more expenses and I keep hearing that the best way to have a pension is through your own company too. But if you want a quick in and out way to take up a contract, then that's where the umbrella companies are useful

somebodude

http://www.vantage.ie/candidates/my_accountant.html

I've used Mac (richard collins) several times over the years and can highly recommend
the professionalism.
Does what it says on the tin, all that horrible paperwork etc etc, just give him a call.

czar1

Out of curiosity Volter, who did you end up going with? I am expecting a job offer (fingers crossed) in the next couple of weeks and would like to know which was the best option (i.e. easier to use, more money in the pocket at the end of the day) - umbrella vs limited.

Volter

czar1 wrote: »

Out of curiosity Volter, who did you end up going with? I am expecting a job offer (fingers crossed) in the next couple of weeks and would like to know which was the best option (i.e. easier to use, more money in the pocket at the end of the day) - umbrella vs limited.

I use umbrella company through CXC. The service is great , but fee is expensive. I cannot recommend them highly enough.

czar1

Thanks Volter!

kate156

Hello
I have just been offered an initial 6 month contract and need to join an umbrella company, I am considering ICON accounting ,If anyone is using them can they advise if they would reccomend them or are happy with other service providers..

I am 100% new to contracting as always have been a permanent employee and so this all new to me.

many thanks
Kate.

tonto2010

kate156 wrote: »

Hello
I have just been offered an initial 6 month contract and need to join an umbrella company, I am considering ICON accounting ,If anyone is using them can they advise if they would reccomend them or are happy with other service providers..

I am 100% new to contracting as always have been a permanent employee and so this all new to me.

many thanks
Kate.

Kate,

Did you use ICON in the end? I am starting to contract tomorrow and am wondering what their price/service is like compared to others.

Thanks

kate156

Tonto.
My contract does not start until Mid August so I have not committed to ICON or any other supplier as yet. I am also waiting for my recruitment agent to let me know if they will deal with ICON .. needs to do some audit checks on them. The guy I spoke with on the phone at Icon was pleasant and not overly pushy so I think I will work with them if possible.

best of luck with the contract.
Kate

Dagon

Just wondering why you went with Icon when Fenero and Nasa (UK) seem to be the cheaper options? It's 25e per week with Icon (umbrella company provider).

I'm currently after accepting a contracting position, and am also trying to figure out what is the best option. Fenero and Nasa look like the cheapest

sartay

Dagon wrote: »

Just wondering why you went with Icon when Fenero and Nasa (UK) seem to be the cheaper options? It's 25e per week with Icon (umbrella company provider).

I'm currently after accepting a contracting position, and am also trying to figure out what is the best option. Fenero and Nasa look like the cheapest

i can recommend Fenero if that's any help. Used them for a couple of contracts over the last 18 months or so. I used CXC a few years back and found them to be very good. But Fenero have been just as good and much cheaper. If you can find a good reputable company I dont know why you'd pay extra - it's basically the same service that they all provide. You just want to make sure they are efficient and do everything they can to keep your tax down.

Havent heard of Nasa before though - anyone used them? Do they operate in Ireland? They seem to be UK based.

twilight_singer

sartay wrote: »

i can recommend Fenero if that's any help. Used them for a couple of contracts over the last 18 months or so. I used CXC a few years back and found them to be very good. But Fenero have been just as good and much cheaper. If you can find a good reputable company I dont know why you'd pay extra - it's basically the same service that they all provide. You just want to make sure they are efficient and do everything they can to keep your tax down.

Havent heard of Nasa before though - anyone used them? Do they operate in Ireland? They seem to be UK based.

+1 for Fenero. Have been using them for the last 3 months and found them to be excellent. They give plenty of advise re expenses/taxes and always get paid on time.

tonto2010

I went with Prima in the end, always prompt and good communication, cost 100 euro a month. I would recommend them

allibastor

hey OP.

I have used CXC in the past a good few times, and always kept coming back to them. they were good, yeah the fee is a bit much some times, depends on how much you earn. the most i ever payed was 70 euro for a week where i earned wel over 1500 euro. they are also good if you ever get audited, which did happen to me once. it was all sorted without much intervention from me at all and the tax man was very happy in the end.
i know they also are very handy to get on the phone and have a chat if you need anything.

aindriu80

Just a question, if you have a limited company of your own will one of those umbrella companies take you on and do your tax and pay you into a personal account ?

I do not wish to have to set up a company account with a bank but want to use the limited company I set up for the contract

Any answers would be great

eslsys

aindriu80 wrote: »

Just a question, if you have a limited company of your own will one of those umbrella companies take you on and do your tax and pay you into a personal account ?

I do not wish to have to set up a company account with a bank but want to use the limited company I set up for the contract

Any answers would be great

If you have a limited company and you are contracting to an emloyer, the most efficent use of your funds is to invoice the company and get paid directly by the employer - there are no fees by doing it this way to an umbrella company. You will however need to sort out a bank account to lodge payments for work undertaken.

Others have mentioned in this thread how much various umbrella companies such as CxC will charge you (€125 to €300 per month). The fact you have your own limited company should not matter - you can still use an umbrella company. Depending on the service you choose, they can do your taxes and make payments etc

palethinboy

This may not be the right type of question, but how "creative" with your expenses do these company's allow you to be?

I'm sure that question will raise a few eyebrows so feel free to PM your opinions. I'm looking to maximise my take home pay as the rate i've been offered is not so great.

Eoin

palethinboy wrote: »

This may not be the right type of question,...

It's not really - best talk to an accountant.

srsly78

Umbrella companies generally have a very limited interpretation of the allowable expenses rule. You are much better off operating through a limited company. This way you save money, and even hassle sometimes. In the past I had to mail the Umbrella company receipts, and fill out all their forms every month. If you plan on being a contractor for the long-haul you definitely want your own company. You will have to pay for an accountant, but they often work out cheaper (shop around) and give better financial advice regarding pension and expenses etc.

Most of what you need to know about expenses is here: http://www.revenue.ie/en/tax/it/leaflets/it54.html

Best to claim the unvouched subsistence allowance. Whenever possible pay for stuff online, so receipt is in your email where it won't be lost. For anything with a paper receipt, take a picture using your phone, and store that in email also.

If you are just doing contracting for few months, then no do not set up a company... Once you are a director there is a legal responsibility to file returns etc.

Carpet diem

Can you pay into pension while an employee in an umbrella company ?

retalivity

IM pretty sure you can, although whatever accountancy firm you are with should be able to give more details on it.

My question is can I claim the fees for a course as an expense? I am starting a course soon learning another language (spoken language, not programming) and while it doesn't relate at all to my current position, it may well assist me in my career further down the line with my next contract/ft position. Anyone have experience of this? I too am in an umbrella company.

Carpet diem

retalivity wrote: »

IM pretty sure you can, although whatever accountancy firm you are with should be able to give more details on it.

My question is can I claim the fees for a course as an expense? I am starting a course soon learning another language (spoken language, not programming) and while it doesn't relate at all to my current position, it may well assist me in my career further down the line with my next contract/ft position. Anyone have experience of this? I too am in an umbrella company.

if it relates to your work yes you can.

sartay

retalivity wrote: »

IM pretty sure you can, although whatever accountancy firm you are with should be able to give more details on it.

My question is can I claim the fees for a course as an expense? I am starting a course soon learning another language (spoken language, not programming) and while it doesn't relate at all to my current position, it may well assist me in my career further down the line with my next contract/ft position. Anyone have experience of this? I too am in an umbrella company.

If you are in an umbrella company you can only claim for courses if they relate to your current contract. If you want to claim for courses that may possibly help you in the future in getting another contract etc, you need to set up your own company as it is seen by revenue as a type of business development cost. A friend of mine had issues with revenue over an expense like this. Basically imagine that you are in a normal permanent job and you want to learn French, but you and your employer know that you will never have a need for speaking French in your current job. Your employer can't pay for that tax free as it has nothing to do with your job with them. You might be thinking that you could learn French to help get a new job elsewhere but that is not going to benefit your current employer, so it's not therefore a cost which your current employer can pay for/claim as a business expense for his company. That's how it was explained to my mate and it made sense when it said like that. Basically when you are in an umbrella company you have to think about what would be allowed if you were in a normal permanent job. Revenue are clamping down on all this and trying to get contractors in line with PAYE employees through all those audits that have been going on.

Blanco100

Recently landed a financial services position and have a 6 month contract. The agency in question have asked that I set up an umbrella company in order to be paid.

Its only when I started that I realised that I am liable to cover both employee and employer PRSI which amounts to 15% of my wage (which is not all that high anyway). Other starters through other agencies are simply paid by their agency for the duration of the contract.

Basically on a salary of 35k i'm paying an extra 340 per month between management fees and employer PRSI. Its absolutely mental. But i'm stuck now because this is the arrangement the agency has with my place of work.

Is there anyway around this at all I wonder without losing my status as a PAYE worker (pays towards stamps etc...) I don't want to lose any benefits by going the director route

I guess i'm just at the mercy of my agency on this one

hidinginthebush

If you don't want to lose your status as a PRSI worker you can work for an umbrella company as an employee. I set up as a contractor through contractingplus recently and this was certainly an option.

Blanco100

hidinginthebush wrote: »

If you don't want to lose your status as a PRSI worker you can work for an umbrella company as an employee. I set up as a contractor through contractingplus recently and this was certainly an option.

Thats what I am doing but I have to cover the employer PRSI contribution 10.75% (even though nobody is working for me), and the Employee PAYE contributions 4%

Its the guts of 300 per month extra to do it this way, rather than be paid directly by the agency. Its just something they don't do

CIARAN_BOYLE

The thing is contractors negotiate on a total cost basis rather than this is my wage. Usually they are paid one and a quarter to one and a half times the average wage in their industry. You don't look to have gotten that with your salary so you failed the negotiation stage in getting your job.

Gray.S

Hi,

I am doing contract work through an agency and they have offered 3 methods of payment: PAYE, limited company, or umbrella company. I only plan on doing this work for 4 month, then returning to full time employment in the public sector. I've ruled out setting up my own ltd company but wondering what the benefit is of an umbrella company (Director) vs PAYE?

I understand I can claim expenses through umbrella company, but surely I would have to claim a significant amount to offset the fee associated with the accountancy firm? eg. for a monthly fee of €200 I would have to claim expenses of ~€500 to get any benefit (at 40% income tax rate)?

If i choose the PAYE option, is it just like a regular job or are there extra forms and tax returns I'll be liable to file?

Any help much appreciated!