Umbrella Companies for Project Managers
So, what are the best type of Umbrella Companies for Project Managers? And what about interim managers and contract programme managers?
The first step to take is to work out whether you need to use an umbrella company or not.
Financially, you may be better off using a ltd company. However, the Government are making that far more difficult these days. Contractors can expect further Government attacks in this area.
Too Many Contractors Incorporating
The Prime Minister and Chancellor said that too many people are incorporating just to save tax.
They said that they would fix that.
They asked the question “Why should a person in self employment pay less tax and National Insurance than a permanent employee paying £100,000 a year.
Well, for one thing they are not comparing like with like.
However, from the above statements we can see their future intent as regards contractors.
IR35 Employment Test
HMRC have set up an online IR35 Employment Status Test.
It is worth taking that to see how HMRC judges your employment status.
Generally, contractors who are outside IR35 use a ltd company. Those inside IR35 use an umbrella company.
However, don’t take the HMRC online IR35 test as gospel.
It is only HMRC’s view of who is inside and outside IR35.
And you have to admit that they are biased.
It is the law and the courts who decide if you are inside IR35 or not.
However, if you pass HMRC’s test you can safely say that you are outside IR35 and can use a personal service company (ltd company).
Why Use an Umbrella Company?
So, why would contractors use an umbrella company?
Firstly, as stated above, if they are inside IR35.
Secondly, if they want to sleep easily in their beds at night without the worry of a potential IR35 investigation.
That could take years and could cost them tens of thousands in back tax, interest and penalties.
Then there’s the time it all takes as well.
Thirdly, some contractors don’t want the hassle of doing a lot of their own admin, e.g. invoicing, book keeping, VAT returns etc.
They are happy to hand that over to a third party, i.e. an umbrella company.
Of course, if they are outside IR35 but using an umbrella company they can still offset travel and subsistence against tax.
PAYE Umbrella Company Returns
A normal PAYE umbrella company would normally return somewhere between 60% and 70% of a contractor’s money. This would depend on income.
However, if contractors took advantage of all the tax efficient means possible to reduce the tax burden on a contractor it could be a good deal higher.
It is important to choose the right Umbrella Companies for Project Managers, Programme Managers and Interim Managers.
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If you do need an umbrella company you could try one of the following:-
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Have a look at our Contractor Job Search section.