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    Becoming a Ltd Company

    HI,
    I was hoping someone in a similar situation might be able to offer me some advice.

    I recently applied for a job via an employment agency and was successful, and would like to accept the role.
    However, this would involve me being paid as a Ltd company. The agency have advised that they use an umbrella company to run the Ltd companies.

    I believe that this means that I just simply fill in a timesheet, and they do everything else, and just pay me the money.
    However, I am not sure how much money they would take from my wages to provide this service?
    This got me thinking maybe it would be a good time to setup my own Ltd company, however I have very little knowledge of what this involves.
    I imagine startup costs, and also completing my own returns are the negative aspects.
    However, I would think the benefits could be, that I could also do consultancy work in the future, I would not be paying the umbrella company a fee, I could potentially save money on future purchases like a computer by reclaiming the tax as a business cost.

    Could anyone please offer me some advise please?

    Many Thanks

    23 Comments

    What sort of job and salary are we talking about?

    This sort of thing is often just to avoid the 'employer' having to bother with all teh legal stuff around employees, sick pay/minimum wage/ PAYE/pensions/ H&S/ liability/etc

    Give us more info on what the job involves - what sort of things will you be working on and whats the worst case if you mess up.

    Original Poster

    Thank for your response.
    It's going to be an office job, working on computers. Can't see there being a big risk involved.
    The salary will be around £47k, rising to £51k after 3 months.

    just go onto Companies House website and set one up yourself, it's around £12. You have to submit final accounts every year which costs around £500 using accountant.

    Banned

    do not do it I've done this in the past and I found out I needed to do a self assessment for tax you are basically self employed.when I started at an agency I was asked if I wanted p a y e or umbrella scheme I chose p a y e and 12 months down the line I and 10 others got large bills for in paid tax as the agency put us on umbrella without my permission. I would do research on umbrella schemes if I was you.

    Original Poster

    norville555

    just go onto Companies House website and set one up yourself, it's around … just go onto Companies House website and set one up yourself, it's around £12. You have to submit final accounts every year which costs around £500 using accountant.



    Thanks for this info, much appreciated

    Original Poster

    bruntz1972

    do not do it I've done this in the past and I found out I needed to do a … do not do it I've done this in the past and I found out I needed to do a self assessment for tax you are basically self employed.when I started at an agency I was asked if I wanted p a y e or umbrella scheme I chose p a y e and 12 months down the line I and 10 others got large bills for in paid tax as the agency put us on umbrella without my permission. I would do research on umbrella schemes if I was you.



    Do you mean o not use the Umbrella company, or do nt setup my own Ltd company?
    Thank you for offering me your advice.

    It is advisable to set up limited company if you plan to work contracts long term. Not worth the effort if it is only short term, then use umbrella company but they take around 20% of your pay so not cheap.

    Be very careful this sounds like some sort of scam. I've set up and run many businesses and limited companies for myself and others and its easy. If you can pm me I can guide you through it.

    Banned

    You cant become a limited company.

    You form one & then you run it & there is a big big difference.

    Original Poster

    mutley1

    It is advisable to set up limited company if you plan to work contracts … It is advisable to set up limited company if you plan to work contracts long term. Not worth the effort if it is only short term, then use umbrella company but they take around 20% of your pay so not cheap.



    Thanks for this. 20% is a lot, after tax and NI too, it all adds up.
    Thinking setting up a Ltd company might be the way to go.

    Original Poster

    jumbodave

    Be very careful this sounds like some sort of scam. I've set up and run … Be very careful this sounds like some sort of scam. I've set up and run many businesses and limited companies for myself and others and its easy. If you can pm me I can guide you through it.



    Thanks for this, much appreciated

    allsa001

    Thanks for this. 20% is a lot, after tax and NI too, it all adds … Thanks for this. 20% is a lot, after tax and NI too, it all adds up.Thinking setting up a Ltd company might be the way to go.



    The limited company is the cheapest option and most tax efficient. You will need an accountant so get some quotes.

    Original Poster

    mutley1

    The limited company is the cheapest option and most tax efficient. You … The limited company is the cheapest option and most tax efficient. You will need an accountant so get some quotes.



    Thanks, yes I am starting to think this is the way to go.

    Banned

    yes set up your own limited company is the way to go you may as well because umbrella schemes are no good.but make sure this job is all good before you commit to anything.

    Banned

    an umbrella scheme is basically a tax avoidance for the agency and you will be the victim in the long run trust me Google it if you need to.

    Make sure you get a really good accountant, do some research about him/her/them. I used to have a ltd company many years ago, and then went on to PAYE as i was offered a permanent contract (this is for an office job too). When I went to close the company, the company house told me that i could not because the accountant was under scrutiny and their were examining all his accounts. It took a year to close the company, I did not have any trouble but with hindsight I should have hired a reputable accountant, this one was recommended by a colleague, but he turned out to be not a very good one

    It is very common that consultants operate as a limited company, so this is even more of an incentive if you see yourself continuing as a consultant.

    Again, adding to previous comments, get a good accountant. They will guide you in the many benefits you can gain by becoming limited.

    Sound like looking up "IR35" would also be a good idea - I thought they'd clamped down on those arrangements where a "company" has one person providing service to a single organization

    YouDontWantToKnow

    You cant become a limited company.You form one & then you run it & there … You cant become a limited company.You form one & then you run it & there is a big big difference.



    There's not a huge difference from his perspective and you haven't really tried to explain it.

    Banned

    ibblackberry1

    There's not a huge difference from his perspective and you haven't really … There's not a huge difference from his perspective and you haven't really tried to explain it.



    Precisely. There is no point trying to explain it. The OP will only learn it when they get into trouble

    the building game mainly uses this system.and whatever your wages are you'l get that amount.the umbrella company wont take a penny from you.
    how they make money,only they know.
    i had trust issues with that pay system at first,now its common place.
    but then again,make sure you never - ever give your agency any money.
    keep money safe.

    you don't need an accountant if you set up your bookeeping properly

    allsa001

    Thank for your response.It's going to be an office job, working on … Thank for your response.It's going to be an office job, working on computers. Can't see there being a big risk involved.The salary will be around £47k, rising to £51k after 3 months.



    So its a contract? No job security so be aware if you are leaving a normal job.
    Office job working on computers can have massive risks - if you screw up then the costs to the business can hit £££££.
    Look into PI and PL insurance.

    Probably easiest to start using their brolly - make sure you are not tied in though. To run a ltd you need to have an understanding of TAX/VAT/PAYE etc.
    Check payment terms - how long will it take you to get paid.

    Run along and join the contractorUK forum.
    Edited by: "mas99" 30th Oct 2016
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