Umbrella Companies - 90%???

[Spinal]

Question for the contractors out there... I've always been used to 70%/75% take home pay with a LTD; but I've seen some companies which purport to offer 90% take home pay after taxes...

There's quite a few of them, I wont bother posting links... but I was curious if this seems legitimate?

M.

 

[Satch]

The key question ask in all such arrangements:

Q. "Who is carrying the majority of the risk that you claim does not really exist?

A "Ah that would be you....."

 

[wemorgan]

I've not read of an umbrella company that promises 90% that I'd be happy working through.

If you have a wife/partner that is currently not working then there are tax benefits to make her a shareholder and hence pay dividends. This increase the % take home, but not to 90%.

Depending on many factors ~80% for a LTD is still possible whilst staying the good side of HMRC.

 

[Simon_M]

Not worth the risk IMHO, I think HMRC are targeting these set-ups now anyway, and as Satch says, the umbrella will have no liability when it is rumbled.

I could do you 95% take home with you 100% liable!

 

[Spinal]

Agreed on the risk front - but the sheer number of companies is what is boggling me. Is there something I've missed? (ironically, I found this while looking for a new accountant to deal with).

(e.g. Darwin, freestyleaccounting, choicepremier, and a few others) After doing some reading, some suggest unrealisting things (e.g. pay almost the entire salary, bar minimum wage, into a pension scheme), or some strange offshore arrangement... which is a little too dodgy for my liking.

Looks like the old adage of "if it's too good to be true..." holds in this case.

Ah well, back to paying taxes Speaking of which, can anyone recommend an accountancy firm? I've head ok things of SJD, a colleague of mine uses them... Any suggestions?

M.

 

[Ian_Mac]

Funnily enough I was listening to a contractor only yesterday who was saying they show £84 per day as pay, the rest goes offshore with the money retuning as a 100 year loan which never gets repaid.

There may be more to this but it was the gist of the conversation as he was trying to persuade salaried staff to convert.

 

[Mr E]

Funnily enough I was listening to a contractor only yesterday who was saying they show £84 per day as pay, the rest goes offshore with the money retuning as a 100 year loan which never gets repaid.

There may be more to this but it was the gist of the conversation as he was trying to persuade salaried staff to convert.

Was this not the type of scheme that Jimmy Carr and other loudly fell foul of a while back?

 

[wemorgan]

Agreed on the risk front - but the sheer number of companies is what is boggling me. Is there something I've missed? (ironically, I found this while looking for a new accountant to deal with).

(e.g. Darwin, freestyleaccounting, choicepremier, and a few others) After doing some reading, some suggest unrealisting things (e.g. pay almost the entire salary, bar minimum wage, into a pension scheme), or some strange offshore arrangement... which is a little too dodgy for my liking.

Looks like the old adage of "if it's too good to be true..." holds in this case.

Ah well, back to paying taxes Speaking of which, can anyone recommend an accountancy firm? I've head ok things of SJD, a colleague of mine uses them... Any suggestions?

M.

I use SJD. A very slick operation, but not cheap ~£120/month inc. VAT. Several friends just use local accountants @ £80-100/month. But they are charged extra per hour for phone advice etc. SJD offer this inclusive.

I'm not an accountant, but I think it's fair to say the more you pay in to your pension the less tax you'll pay. The upper limits for pension contributions are very generous.

 

[markjay]

...I'm not an accountant, but I think it's fair to say the more you pay in to your pension the less tax you'll pay. The upper limits for pension contributions are very generous.

This is correct, assuming your overall income will reduce once retired.

 

[PXW]

Was this not the type of scheme that Jimmy Carr and other loudly fell foul of a while back?

Yes, this was the essence of the Jimmy Carr scheme. Highly dodgy. HMRC are increasingly (and successfully) attacking schemes where the legal form does not reflect the underlying economic reality. In this case, a 100 year interest free (or even very low interest) loan economically is the same as receving the cash without obligation - the loan will never need to be repaid.

 

[Spinal]

I use SJD. A very slick operation, but not cheap ~£120/month inc. VAT. Several friends just use local accountants @ £80-100/month. But they are charged extra per hour for phone advice etc. SJD offer this inclusive.

I'm not an accountant, but I think it's fair to say the more you pay in to your pension the less tax you'll pay. The upper limits for pension contributions are very generous.

That's about what I'm paying now to someone I found a while back through friends... but I don't get very much out of it (in my eyes at least). Will give them a ring and see what they can do for me... Thanks

(on a side note - Jimmy Carr uses peak performance accountants... wonder if they're any good and how much they charge )

 

[fredT]

Along these lines.. I need to release some cash from my company (Ltd) and my accountant says the most efficient way to do this is to dissolve it. This carries a few charges specially the liquidators fee as they need to purchase a bond for insuring your cash or something along those lines (I don't understand half of it..). And then of course there is the cost of setting up a new company (new business)

What tax efficient alternatives are there..?

 

[janner]

This is correct, assuming your overall income will reduce once retired.

And assuming no future government decides to raid your pension before you get to retirement age (whatever that may be by then)

 

[PXW]

Along these lines.. I need to release some cash from my company (Ltd) and my accountant says the most efficient way to do this is to dissolve it. This carries a few charges specially the liquidators fee as they need to purchase a bond for insuring your cash or something along those lines (I don't understand half of it..). And then of course there is the cost of setting up a new company (new business)

What tax efficient alternatives are there..?

Nowhere near enough information to advise, I'm afraid. But your accountant is effectively suggesting that you create a capital gains event (by liquidation), which should leave gains exposed to tax at the 10% entrepreneur's rate (subject of course to a whole list of conditions), which is pretty efficient. I'm assuming therefore that you have already dealt with options related to dividends, that there is insufficient share capital/premium to do a capital reduction and that your pension arrangements don't permit you to pay the surplus cash into a pension plan and then take a cash withdrawal etc etc.

If your accountant has come up with liquidation then he will have thought through all the alternatives for you (or else he is just being reckless!). But you could always do a Jimmy and invest the cash in a friendly (but not related) overseas entity which could then lend it to you personally at no interest for a very long time....

 

[fredT]

Thanks.

Is there really much in paying yourself a pension these days? You basically lock up your cash until pension time, and pay the tax then instead of now?

Or am I being stupid and am missing something obvious?

 

[wemorgan]

Thanks.

Is there really much in paying yourself a pension these days? You basically lock up your cash until pension time, and pay the tax then instead of now?

Or am I being stupid and am missing something obvious?

Most people have more income whilst working than whilst a pensioner. So in theory you defer paying tax today, for the benefit of paying less tax as a pensioner.

I think most IFA advise having a balance of pension and ISA as a source of future income.

For the self employed using pension contributions is a very tax efficient method of taking cash out of the company.

 

[PXW]

Thanks.

Is there really much in paying yourself a pension these days? You basically lock up your cash until pension time, and pay the tax then instead of now?

Or am I being stupid and am missing something obvious?

Limits are falling (1.25m total and 40k/annum from next year). But in my book it still makes sense - the money goes in along with tax relief and can then accrue income free of tax within the scheme until the point of drawdown. It's the tax free income, compounded, that makes the difference.