Limited Companies or Umbrella Companies? Paul Rawlings Video Interview

Once again would really like to thank Paul for taking the time to talk about the differences between limited companies and umbrella companies and really go into a lot of detail about how to best choose a contractor accountant.

Excerpt from the interview.

Coming from an accountant point of view, it’s all down to tax. In an umbrella company it’s not tax efficient. You spend a lot more money. Basically, you’re just being taxed as an employee, you also have the additional cost of employers national insurance, because you’re actually suffering that as well.

So, the biggest thing, if you’ve got your own limited company is obviously the tax efficiency. I think umbrella companies came about as helping contractors overcome the substitution clause, in that if an umbrella has got hundreds of contracts, then potentially they could send a substitute for another contract.
Which, if you’ve got one contract in one limited company, it makes it difficult to say that someone has got equal skills and they can perform that role.

So that’s the only benefit I see that an umbrella company gives you, for protection of IR35. It obviously does a bit of paperwork for you, but at the end of the day, that’s nothing really.