I have been employed as a customer relations manager with RBS for some years now. As a result of necessary cost cutting, I am losing my job within a few weeks. However, I have been asked to continue working for RBS for a further 6 months, not as a permanent employee but rather via an agency on a day-to-day basis. I suppose a bit like a consultancy. I will be paid by the agency at twice my present salary.The agency tells me that there are three routes I can take: 1 – I can receive weekly payments direct from the agency with PAYE deducted (tricky to balance monthly and quarterly direct debits etc).2 – I can set up a limited company with me as director (I would have to do all the admin and find a tax accountant for the rest, etc – not particularly onerous).3 – I could work for an 'umbrella' company which would charge a small fee from the money the agency pays to them but sort out all tax and admin and pay me monthly on the date of my choice and provide holiday/sick pay).Something to bear in mind is that I am told that I will not be able to claim travel and meals as expenses as this contract will mean I will have been on the same site for over two years. This detracts from the 'expenses led' options.At the end of the 6 months, I am intending to buy a franchise operation and run my own business.Which, in your opinion, is the best route for me to take or perhaps none of the above routes but a completely different one?Thanks, Christopher.
Province/Country relating to question: England
Nothing - it has only just been sprung on me,
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Thanks for your question
Both the limited company and Umbrella company options (which is the same as a limited company) are in breach of the IR35 legislation, which states, were it not for the company, would the individual in fact be an employee, and the answer is yes,plus you will work just for the one business, so you have to choose option 1, be paid through PAYE with the agency.
I would also point out, even if this was a accurate procedural way of engaging a contract - you may be lulled into thinking there are tax savings to be had with the limited company and umbrella company, but in these agency set ups, you also have to suffer the Class1 employer National Insurance, a further 13.8% on your income (with first £5304 a year free) which they seem to fail to tell individuals.
I have also added a link here re IR35 for your information
And as a PAYE employee, travel to and from work is not an allowable expense nor is food. (And food is never allowable if self employed/limited company or when you start this franchise)
From what you say, it seems that if I work on contract for the bank only, then route 1 is what I should choose.
However, if I also accept an invitation to do some work for another bank, I presume that the situation would change.
Also what happens if after I start my franchise business and work for the agency in any spare time I have..
Thanks for your response
Yes for now Option 1 is the only route, but even if you pick up this work also with another bank you need to consider certain aspects as to whether you can go the limited company route, by looking at whether the work you do could be treated as anything other than employment (so in essence self employment)
Do you advertise your services and have more than one client
Do you use your own tools for the work
Do you work the hours that suit you
Can you make a profit as well as a loss on the work
Do you work in your own premises
I have added a link for the employment status information which also has a tool linked to it where you answer yes/no or select from a drop down menu, to establish your status of employment http://www.hmrc.gov.uk/working/intro/empstatus.htm
26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax