rahulsingh1 wrote:actually in the contrary- it is more safer to do contracting under entrepreneur visa- because if hmrc notices you, you would be ruled out as an employee because you cannot become one.
Another thing is, that is not an issue even if they deem you as an employee because under entrepreneur visa you can be self employed as well. And self employed people pay same taxes as any normal employee. So there is no risk.
Please let your friend know this..
let us know what your friend thinks now..
Let me explain. My point of view may be slightly different i.e. from tax and HMRC point of view.
Working through umbrella companies means that these company act as your employer in order to avoid the NI contributions by your limited company.
This practice is highly disregarded by the HMRC and one may fall in to IR35 legislation. From 6 April 2013 the IR35 rules are further tightened.
Briefly, IR35 means that if fall under this legislation, HMRC will consider there is no limited company and you will be liable to pay much higher tax liability and NIC. Same as what an employee pays if there was no limited company.
I personally think you do not need an umbrella companies for your contracts. All you need is to register as a self employed with HMRC instead of limited company. Under this arrangement you will pay class 2 NIC (2.65 per week) and class 4 NIC based on your profits.
There is income tax implications as well but you will be able to claim deduction of your business expenditure which under IR35 you can't (with exceptions).
This arrangement is no more different than what Umbrella companies do. By registering as self employed with HMRC is pretty straight forward.
The only downside is that you expose yourself to your creditors personally. It means that if you unable to pay your business debts you will be personally liable. In addition, Class 4 NIC will also be payable but this will be based on your profits.
As a contractor I do not see many creditors.
I hope this helps.
