Tag Archives: Umbrella Company Costs

The costs of operating an offshore umbrella company are 10% to 15% of earned income leaving the contractor with 85% to 90% of their money.

[caption id="attachment_471" align="alignnone" width="275"] Umbrella Company Costs for UK contractirs[/caption]

Offshore Umbrella Company Benefits

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Offshore Umbrella Company Benefits

Offshore Umbrella Company Benefits

Benefits – so what are the offshore umbrella company benefits?

The main benefits are all connected to the money. This is the best way for contractors to keep most of their money. They can keep anywhere between 84% and 90% of their hard-earned money.

The exact amount depends on how much they are earning.

Mrs Thatcher Changed the Loan laws

Offshore Umbrella Companies started up when Mrs Thatcher changed the laws so that money sent offshore was no longer taxable. It was one of the first laws she brought in when she became Prime Minister in 1979. The Tory party grandees were among the first to get the benefits.

One of the earliest to benefit was David Cameron’s father Ian. He quickly saw the benefits  and set up lots of offshore schemes. Indeed he made his money that way. That’s where David Cameron’s inheritance came from.

Many of the Tory grandees saw the benefits and operate schemes like these including Lord Astor, David Cameron’s father-in-law and Lord Ashcroft, the Tory party’s main donor.

How Loans Works

So, the money that is sent offshore stays offshore. The Offshore umbrella company loans the contractor money in lieu of that loan. The loan is never paid back. The contractor defaults on that. The Offshore Umbrella Company takes the money in lieu of that.

Money is not taxed until it comes back onshore. The money never does. It is different money. Loans aren’t taxable. This is how it all works. It’s how the contractor benefits.

Tax Avoidance

It is tax avoidance, of course. However, it is legal and it is not tax evasion which is illegal.

The Government complain about it. However, it is they who make the rules. It is they who can change them. Contractors and others are only taking advantage of the rules as they are. They take the benefits from the Governments own laws.

Indeed it is the legal duty of the directors of a company to maximise the returns for shareholders.

Of course, the Government don’t want to change the rules as it benefits many of their party sponsors. Indeed George Osborne has a £4.5m family offshore trust. He sees the benefits of it.

Benefits Not Intended

It’s annoying for the Government when newspapers reveal that comedians and rock stars are reaping these offshore umbrella company benefits.

The benefits weren’t intended for the likes of them and contractors. The Government had to react. However, they don’t change the law.

For some examples of these companies see Offshore Umbrella Company List

offshore umbrella company list

Offshore Umbrella Company List

Offshore Umbrella Company Returns

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offshore umbrella company list

Offshore Umbrella Company Returns

So, what are the offshore umbrella company returns on your hard-earned cash compared to other options?

First of all, what are the other options?

Firstly, you can just pay up on your IR35 tax. Secondly you can operate through a Limited Company (or Personal Service Company). Thirdly you can operate through a PAYE Umbrella Company. Finally, you can operate through an offshore umbrella company.

Offshore Umbrella Company

Offshore Umbrella Company Returns can vary anywhere between 85% and 90%, depending on your income. Using offshore umbrella companies are by far the best method of keeping most of your money.

So, if you earned £100,000 you would expect to keep £85,000 to £90,000 of the money you earn.

Limited Company (Personal Service Company)

This is the next best option. However, you would still be £10,000 to £15,000 down than the offshore umbrella company returns. You would expect to keep around 75% of your money. So, you would keep around £75,000 if you earned £100,000.

Onshore Umbrella Company

Using a normal onshore umbrella company would let you keep around 60% of the money you earn. This means you would keep around £60,000 of the £100,000 you earned.

PAYE Operator

If you pay the IR35 tax or use normal PAYE, you would get back around £55,000 of £100,000 that you earned.

There are many reasons for using one or the other. However, if it is a bean count, and you are just going for the most lucrative option then the offshore umbrella company returns of up to £90,000 makes it a no-brainer for contractors.

You could be keeping up to £30,000 a year more by using an offshore umbrella company rather than using a normal onshore umbrella company. That mounts up over time. That money escapes you.

To find out more about offshore umbrella company returns you should click on Offshore Umbrella Company Directory

offshore umbrella company list

Offshore Umbrella Company List

Offshore Umbrella Companies – How Much Money will I keep?

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How Much Money

How Much Money Will I Keep

Contractors want to know “How much money will I keep by using offshore umbrella companies?”

Is it worthwhile operating through Offshore Umbrella Companies? How much money will you save a year by operating this way?

Say you are a contractor who is earning just over £400 a day – which is around £100,000 a year.

If you operated PAYE you would probably keep about £64,000 of that.

Offshore Umbrella Companies Viable Alternative

Offshore Umbrella Companies Viable Alternative to PAYE Umbrella Companies and Limited Companies

If you operated through a Limited Company you might keep around £75,000 of that.

If you operated through one of the offshore umbrella companies you would keep something between £85,000 and £90,000 of that depending on how much you earn and your circumstances.

Operating Through Limited Company

So, if you were PAYE you would contribute about £36,000 a year towards the Treasury.

Therefore, if you operated through a Limited Company this loss would be around £25,000 a year.

However, going through one of the offshore umbrella companies you would give up between £10,000 and £15,000 a year. Most freelancers would be towards the lower side at 85% but if they got a really good contract rate they could probably negotiate up towards the higher mark.

It’s probably worthwhile getting a quote from 3 or 4 companies to see what is the best offer. You’ve worked hard enough for it and you might as well keep as much as you can of it.

Government Complaints

The Government complain about it but have no real will to stop it. As the top dog in Google asked, why are they complaining when it is they who created the rules that allowed tax avoidance in the first place?

Legal Tax Avoidance for UK contractors

Legal Tax Avoidance schemes used by UK contractors

It was the Thatcher Government who changed the rules to allow money to go offshore untaxed which gave rise to this tax avoidance in the first place. If they were to abolish it now it would hit many of the Conservative Party donors.

As one of top dogs at HMRC said recently many of these schemes are completely legal. If the Government want to make them illegal they have to change the laws. Until then, offshore Umbrella Companies are legitimate ways for contractors in the UK to avoid tax quite legally.

To see details of these offshore umbrella companies and how much money you would keep see Offshore Umbrella Companies Directory

Umbrella Company Reviews – Offshore Umbrella Companies

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Umbrella Company Reviews for Contractors

Umbrella Company Reviews

Contractors often ask us for Umbrella Company Reviews. We are happy to oblige.

There are two types of Umbrella Company. There are offshore umbrella companies and there are onshore umbrella companies.

The Umbrella Companies HMRC prefer are the onshore umbrella companies. That’s because they get more tax from them.

Tax Avoidance Measures

So, Offshore Umbrella Companies are tax avoidance – but legal tax avoidance. They allow the contractor to keep from 80% to 90% of his, or her, money earned.

Contractors choose an umbrella company or a limited company. The Limited company options returns more to the contractor than the onshore umbrella company. However, offshore umbrella companies return the most.

We have offshore umbrella company lists and onshore umbrella company lists on other pages on this website.

Umbrella Companies Explained

Many of the offshore umbrella companies operate from the Isle of Man.

Onshore Umbrella Companies allow contractors to lay some expenses off against tax. The top umbrella companies are the safe ones.

Contractors can claim travel expenses and overnight expenses against tax as well as a few other things like pension contributions.

Umbrella Company Reviews and recommendations

Umbrella Company Reviews offshore and onshore

Umbrella Company Reviews and Comparisons

With an onshore company you would probably keep about 60% to 65% of the money you earned. With a Limited Company it would be maybe around 75%. With the offshore companies you would keep from 80% to 90%.

There are also companies which operate like the offshore ones but are onshore. They allow contractors to still use their limited companies.

Sometimes, agencies try to steer contractors towards particular umbrella companies. However, the suspicion is that they get commission from doing this. This is illegal under the 2010 Bribery Act – but they still do it.

Working through those offshore umbrella companies is the most lucrative for contractors. Using umbrella companies like that will have returns of up to 90%.

Umbrella Company List

To find some of these offshore umbrella companies, and more umbrella company reviews, you should click on Offshore Umbrella Company List

Contractors who want to find moneymaking opportunities should click on Contractor Moneymaking

Disguised Contractors versus Disguised Employees

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Disguised Contractors

Disguised Contractors

We have a new concept of disguised contractors.

The reason that the Government brought in IR35 in 1999 was because they believed that many contractors were just disguised employees. Many companies were laying off permanent workers on the Friday and they were starting in the same job on the Monday as contractors.

This saved the company money in taxation and NI contributions and gave the companies a more flexible workforce. They could lay off these new contractors without redundancy payments when times were tight. They could, maybe, hire them again when things picked up.

It was good for the new contractors, as well. They could offset a lot of things against tax that they couldn’t before. It was a win-win situation. Rather it was a win-win-lose situation with the Government / HMRC / taxpayer as the loser.

Disguised Employees

The Government, and HMRC, quite rightly saw these as disguised employees. It was a scam – a tax avoidance scam.

However, the law that the Government brought in, IR35, caught not only those disguised employee contractors in its nets but tens of thousands of contractors who had been operating, quite legally, as Limited Company contractors for years. It is still catching them in their IR35 nets.

The Government hadn’t meant to in the first place. However, when they saw the extra revenue brought in they decided they quite liked that. When the Conservatives were in opposition they gave winks and nods to the PCG about abolishing IR35.

Looked At IR35 Again

Well, they didn’t actually promise to get rid of IR35 but to ‘look at’ it again. They did look at it and decided to keep it. The main reason was that there was a danger that contractors would get out of Umbrella Companies en masse and start up Limited Companies again.

As there are 200,000 Umbrella Company contractors at the moment and they pay, on average, £10,000 a year more in Tax and NI contributions this would be a loss to the Treasury of £2bn a year. They didn’t fancy that. Surely nobody really believed that they would hand back a load of money to people earning several hundred a day.

Government Prefer Umbrella Companies

The Government appear to want as many contractors as they can to get into Umbrella Companies. Although these contractors are able to claim more expenses than a permanent person could claim, while working through an Umbrella Company, HMRC appear to be happy to allow this to happen. They much prefer dealing with a few hundred Umbrella Companies than a million small Limited Companies.

The Umbrella Companies cream off the contractor’s PAYE tax and NI contributions and sends them on to HMRC each week.

Yes, that’s right, these contractors pay PAYE. They are, as far as HMRC are concerned, permanent employees.

Disguised Contractors v Disguised Employees

So, in getting rid of Disguised Employees they have now created what are, effectively, hundreds of thousands of Disguised Contractors.

The disguised contractors are really contractors but they are dressed up as employees of the Umbrella Companies.

The Umbrella Companies are, in effect, a ruse. They are a device so that contractors, whom IR35 catches, can pretend to be employees of the Umbrella Companies (who don’t produce or make anything) in order to claim some expenses against tax.

You couldn’t make this up!

Waste of Time and Money

Isn’t this all just a waste of time and money?

Couldn’t they just have come up with some solution to stop companies changing employees into contractors in the same job over a weekend? Surely it shouldn’t have been so hard to stop that.

Instead they created the monster IR35 which has created an industry in keeping hundreds of thousands of contractors outside IR35 and hundreds of thousands of contractors ‘dressed up’ as employees.

What a terrible waste of everyone’s time and money!

For a list of legal Offshore Umbrella Companies you should click on Offshore Umbrella Company List

Facebook avoiding UK Tax

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Facebook

Facebook

Facebook are the latest company caught avoiding UK Tax. They made £840m in profits last year. However, they paid just £2.9m in tax – all of it in Ireland. Although they only hire 287 staff in Ireland all, of the advertising outside the USA they book to Facebook Ireland.

They book the profit to Ireland. However, they then move that money out of Ireland to the Cayman Islands and its Californian parent. The technique is called Double Irish. They charge the Irish company royalties for using the Facebook brand in much the same as Starbucks do. They moved £750m that way.

Advertising Revenues

Facebook then reported a loss of £15m loss in Ireland despite all the advertising revenues outside the US ending up there. This is even though 44% of Facebook’s revenues come into Ireland.

At least they gave Ireland £2.9m. They gave the UK just £238,000 in Corporation tax. Facebook say that they comply with all UK laws – and of course they do. They just know how to work the system.

It said that it picked Ireland as its European base because it was the “best location to hire staff with the right skills to run a multilingual hi-tech operation serving the whole of Europe”.

The low Corporation Tax of 12.5% and the ability to do be able to do a Double Irish, it seems, played no part in the decision to go there. Of course, Ireland didn’t get any great benefits from Facebook in terms of Company Tax. Although Facebook’s Irish staff pay income tax there.

UK Tax Avoidance

The Chancellor George Osborne has promised to do something about it. However, it will be difficult and he risks major companies pulling out of the UK. He is going to target high income earners in the UK who hide money overseas.

However, most of the schemes are completely legal. Neither the individuals or companies, like Facebook, are breaking any laws. It is legal tax avoidance rather than illegal tax evasion.

The big problem is with companies who charge other companies within the group royalty payments for using the brand name. They are perfectly entitled to do so. They are perfectly entitled to charge them anything they want for the use of it too.

Perhaps that is one area where the UK can legislate, i.e. to limit the amount that they can charge for using the brand name. Of course, those companies will then look for other costs that they can load up in the locations where they want to load up costs.