So the IR35 legislation change has finally happened, and you may now find yourself contracting inside IR35. You’ve decided to use an Umbrella company for your next contract, but what’s the process of switching over and what do you need to be aware of?
In this blog we explore just that so you can continue to contract confidently.
Your status has been determined ‘inside’, what next?
If you’ve already challenged your status determination with your end-hirer / client and have still been determined as inside, you’ve considered all your options as to how you can operate for the duration of the contract and have decided that using an Umbrella company is the right choice for you, then sourcing a reputable one is the next step.
When on the hunt for an Umbrella company, ensure to only trust those who have been awarded the FCSA accreditation (freelancer and contractor services association). By becoming FCSA accredited an Umbrella company has achieved the highest industry standards, ensuring they’re completely transparent and compliant. By choosing an FSCA accredited Umbrella company you’re choosing one of the industry’s best.
Here at Aardvark Accounting our group company, SG Umbrella is proud to be FCSA accredited. If you decided to join us, as an Aardvark client you’re able to switch between using your Limited Company with Aardvark, and our Umbrella services with SG Umbrella, completely free whenever your contract requires you to. Then when you’ve completed your contract, simply let your Aardvark accountant know and they’ll switch you back in the flick of a switch – it’s that quick and easy!
You’re also able to use both services at once, should you be working on two contracts simultaneously, each requiring a different service.
If you have more questions, get in touch with our team to find out more.
Will you have to keep your Limited Company open when using an Umbrella?
Only you can answer this question, as the answer will completely depend on your personal circumstances and plans for the future. If you see yourself contracting for the foreseeable future with contracts both inside and outside IR35, it’s worth keeping your Limited Company open, or placing it in a dormant state. By doing so you’re able to dip in and out of your company whenever you wish, without the need for permanently shutting it down.
If you only see yourself contracting under an Umbrella company for future contracts, then you may consider shutting your Limited Company down completely. Closing it down is a permanent fixture, so be sure to discuss your plans with a specialist contractor accountant before taking any concrete steps.
Do you need specialist advice and support if using both an Umbrella and your Limited Company?
Preferably, yes. Tax and accounting is complicated, and there’s a reason why people spend years training to become specialist accountants. It’s very easy to make simple mistakes which can add up to big additional tax implications, and it’s best to get it right the first time with the help from an expert. For example, any retained profits should really be put into a salary sacrifice pension scheme or invested into property with the professional advice of a financial advisor, in order to benefit from the immediate tax relief.
You’ll also need to reduce your director’s fee and P45 yourself, otherwise by using your Limited Company and an Umbrella simultaneously, the Umbrella will be classed as your secondary employment and you will be taxed as such. You’ll end up paying a lot more tax to HMRC, and you’ll also lose your tax allowances.
By using an accountant that can oversee both your Limited Company and Umbrella services, they’ll have visibility over both your working practices and can advise accordingly. You can also save yourself the trouble and possible future tax mistakes by keeping all your accounting needs under one roof.
Should you let your end-hirer / client know of your chosen working structure?
You should let your end-hirer / client know of your chosen working structure for the duration of your contract. If they need any support or guidance on how to manage this, your accountant should be able to do so. You can also share our free guide: IR35 FAQs for agencies and end-hirers with them, which details the steps they need to take, and what their obligations are.
Aardvark Accounting is here for you
No matter what your decision, the expert team here at Aardvark are here to help you make the right one for you, both now and in the future. With both our Limited Company accountancy services and our FCSA accredited Umbrella company should you need it at no extra cost, we’re here for you. You’ll keep the same accountant no matter which service you use, receive the same level of service, and switch back whenever you wish at the click of a button.
Get in touch today to find out more about the services we offer, and how we can help the switch from Limited to Umbrella and back again, as smooth as possible.