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Umbrella company versus limited company

  • 26-01-2023 3:11pm
    Registered Users Posts: 22 psych77

    Hi All. I don’t know if this is the right forum for this query but here goes!

    My husband has been contracting for a number of years now and is under an Umbrella company. He is based at home part of the time and the rest he attends the engineering site he is working at. He gets mileage and hotel expenses from the contract company he works for, for this. He is paid monthly and all taxes are taken out at source each month. He obviously earns more than if he was directly employed by the engineering company as he pays lower prsi usc etc. some of his colleagues have limited companies rather than being part of an umbrella. His taxation company always tell him there is no real benefit to being a limited company. Can anyone shed light on this as I feel the advice may not be totally impartial. They could no longer be his accountants if he changed to limited company.


  • Moderators, Business & Finance Moderators Posts: 8,582 Mod ✭✭✭✭ Jim2007

    Your requirement for accounting services are unlikely to change even if you form a limited company and if anything there might be a slight increase in the requirement for services, so I would not assume that the advice you are being given is in any wait tinted.

    Others who no doubt have a far more current knowledge in relation to taxation and legal requirements will no doubt address them, but as someone who spent most of his working life freelancing in some form or another, I will you few things that were important to me.

    • First of all you need to understand what the umbrella company does for you and how much it would cost to do this work if you drop them. These services will mainly cover payroll, pension, sick leave, possibly a financing element if there is a time lag between invoice payment and salary payment to your husband. And may be debt collection - following up invoice payment etc.
    • The second thing to ensure you are not paying more than the going rate for these services.
    • A third thing to consider is do you want to have to do the admin yourself? It takes time to do the invoicing, chase payments, prepare payroll, do the annual accounts and filings etc... most people I know using an umbrella companies do so either because that is the only way the can land contracts or because they don't want the hassle of having to do all the admin stuff after they have done their weeks work.
    • Another thing to think about is will the clients be willing to do business with a one man company? Some companies prefer to get one invoice covering 20 contractors than having to do the admin for 20 individual companies. Others like the fact that the contracting company is obligated to provide cover if the contractor is out sick rather than having to chase it up themselves.
    • Another thing to check out is liability insurance. Some clients, particularly US multi nationals have liability clauses you must cover as. vendor and getting insurance to cover them can be difficult for a one man operation, not to mention the expense.

    Hopefully this helps you in coming to a decision.

  • Registered Users Posts: 937 ✭✭✭ swimming in a sea

    I've got a LTD for my contracting, to be honest I'm not sure of the benefit.

    The company who run the umbrella company probably also offer the service of running your LTD company, its usually a bit more expensive. I run the whole thing myself and get accountant to sign it off at the end of the year it but means doing the VAT returns, expenses, liability insurance, etc. myself.

    I was told it was easier to setup an executive pension through my own company, but maybe you were able to this through the umbrella as well.