LOOKING AT MAXIMISING YOUR TAKE HOME PAY AND CONSIDERING BECOMING THE DIRECTOR OF YOUR OWN LIMITED COMPANY. UMBRELLA.CO.UK HAVE THE FLEXIBILITY TO OFFER YOU THE BEST POSSIBLE SERVICE.

Legislation (IR35, Auto Enrolment, MSC)

There are many pieces of legislation which affect Limited Companies. We’re here to guide you through and provide the right advice.

IR35

IR35 is the commonly used term for the Intermediaries Legislation introduced on 6th April 2000.

IR35 was introduced to stop the use of an intermediary, usually a limited company or partnership, to "disguise" an employment relationship between the contractor and their end client. By using an intermediary, the contractor could receive income as a mixture of wages, expenses and dividends which resulted in an increase to net pay when compared to being a direct employee of the client.

IR35 ensures only those individuals who would be genuinely self-employed, receive the tax/NIC benefits of being in business and treats those individuals who are "disguised" employment the same as though they were actually employed.

There are a wide range of factors which need to be considered when looking if IR35 applies, however if your circumstances match the factors noted below you are more likely to fall outside the scope of IR35:

  • You control how, where and when the services are to be provided;
  • You supply your own equipment where necessary to complete the services(for example your contract confirms you can use your own laptop);
  • You receive a fixed fee for completing a set task and are therefore responsible for how you go about completing the task;
  • You can use a substitute to perform the service at your own cost (i.e. the contract isn't for your individual employment but for the delivery of a service); and
  • You are responsible for your own costs and are financially at risk if you fail to deliver the services in line with the contract.

The above factors are just some of the typical areas to be considered when looking at IR35, however this is a complex area and advice should be sought when looking at if IR35 applies to your circumstances.

As IR35 is a critical issue for any contractor looking to provide services through their own limited we recommend that if you are worried about IR35 although Umbrella Accounts are unable to provide technical IR35 advice we recommend from the industry's IR35 experts Bauer & Cottrell. Bauer & Cottrell who can review your contracts and working practices to ensure you stay IR35 compliant.

Managed Service Company

The Managed Service Company ("MSC") legislation was introduced on 6 April 2007 and was brought in to stop individuals who were not genuinely running their own company from receiving the potential tax benefits of being in business.

MSC applies where an individual provides their services via an intermediary, usually a personal service company or a partnership, but the intermediary is effectively being operated by a third party. If MSC does apply all payments received by the contractor should be fully subject to PAYE/NIC, including any expenses reimbursed.

Any PAYE/NIC's liabilities arising become the personal responsibility of the Company Directors and/or shareholders (or partners in a partnership), whilst also becoming potentially transferrable to the third party which is running/managing the intermediary company, known as an MSC Service Provider.

An intermediary must consider whether the MSC Legislation applies before considering IR35, but intermediaries that do not meet the definition of an MSC must continue to consider IR35.

How Umbrella Accountants comply with MSC

Umbrella Accountants simply offer you the choice to select the most appropriate accountancy support you need for your business, we do not run, manage or control your business – you are in total command of your company.

We will discuss whether an umbrella service better suits your circumstances or if a limited company solution is more suitable. If you decide our limited company service is the best for you, we will discuss the level of accountancy support you may require, the type of pay structure you may wish to adopt, the types of expenses which you may incur and whether you can receive tax relief, whether you want a payroll operated and various ad hoc services if and when you require. You can choose any level of service you wish, whenever you may need it but to make things easier we offer 3 main services that suit most contractors running their own limited company.

If you set-up your own limited company Umbrella Accountants are not involved in the day to day running or management of the company. It is your company, you have complete control to make decisions on how to operate and provide services, you are responsible for finding work and getting paid, but with it you do have various legal responsibilities.

We do not manage your bank account nor are we an authorised signatory. You have sole authority to make payments from it, including meeting any income tax, corporation tax PAYE and VAT liabilities of the company.

We review your specific circumstances in full but you decide which is your favoured option from being paid direct by your agency through PAYE, being paid through Umbrella or by setting-up your own limited company.

Running your own company doesn't need to be difficult and the benefits can be rewarding. We are here to help, but the level of support is your choice.

The Senior Partner of Umbrella Accountants is a Chartered Accountant and holds a Practising Certificate issued by the ICAEW.

For £199 plus VAT per year IR35 experts Bauer and Cottrell supply unlimited IR35 contract reviews. They will review all of your contracts entered into during the year (including any extensions), all associated documents and your working practices and give you an independent pass or fail IR35 opinion in writing.

Emma is definitely an asset to the company and in more than one occasion she has proven to be efficient, prompt and patient in my regards, and I'm sure in anyone else's. 

Mike C (July 2016)