locum limited company

RE: locum limited company

Simo — Wed, 09 Sep 2015 18:46:23 GMT

It seems that Umbrella Companies have set their mind to have short lived "employment" relationships. Today mine refused to pay VDS and most of the subsistance expenses (apparently you're not entitled to claim meals if the practice is providing sleeping only accomodation on-site, wich is not what I understood from their expenses handbook, nor from HRMC site). By the way, we (me and Luca) intended to open a Ltd with the new tax year, to avoid messing too much with his employement history this year, but is there a real advantage for waiting or it's just in our mind?

Re: locum limited company

Neil Wheadon — Mon, 29 Jun 2015 10:25:33 GMT

It's an absolute minefield and changes yearly, hence the need for an accountant

Self Employed you pay 9% NI (there or there abouts) Normal taxes

PAYE, you just pay class 1 - 12% (I think)

Umbrella and Ltd Company, both Employee and employer NI. This is no small amount, the employer NI is 13.8%

Therefore if you are a locum using an Umbrella or Ltd company you'll need to take account of this.

However the tax advantages are greater as a Ltd or Umbrella Company and the crucial figure is that if you are earning more than £25000 / annum then it is better to go Ltd rather than self employed. (Umbrella - check the charges)

As indicated in this conversation Umbrella companies have hidden fees and are really a short term solution and this is acknowledged by the Umbrella Companies.

A useful synopsis is at

http://www.carltonprofessional.co.uk/locum-info/employed-or-self-employed

One very interesting point which I've learnt looking through this, is that if you are paying a locum PAYE at the same rate as a Ltd company vet, you're loosing out by 13.8%. Maybe a Ltd Company locum is good value then or should we charge 13.8% more?

Detailed at

http://www.contractorumbrella.com/employers_nic.html

You may be offered two different rates, one to be paid directly through the company’s payroll and another, higher rate, to have your pay processed through an Umbrella Company. The lower rate will apply if you opt to be paid directly by the company because they themselves will be liable for the Employer’s NIC. The higher rate is offered if you are being paid through an Umbrella Company because they are liable to pay the contribution. Provided the difference between the two rates is greater than 13.8%, you will be better off through an Umbrella Company because there are certain business expenses that you may be entitled to claim.

Neil

Re: locum limited company

Hannah Wynne Richards — Mon, 29 Jun 2015 08:50:03 GMT

If self-employed then there is no employers NI

Wynne

Re: locum limited company

rjhvet — Sun, 28 Jun 2015 22:21:44 GMT

I think there is confusion amongst locums ( not Neil) re umbrella companies and limited companies. Vets need neither of these to work as a locum. When working through an umbrella company ( eg similar to working via an agency) they are classed as employees. The money paid also includes amoutn for holiday pay etc. Vets are perfectly entitled to work as self employed locum, we would get a signed declaration stating that they are aware they are liable for their own tax and national insurance. Merely need to inform local tax office that you wish to register for additional earnings, then fill in appropriate forms to calculate income and take into account allowable expenses eg mileage, overnight accommodation, subsistence ( meals etc).

Our accountant will not allow us to use self employed nurses long term as they hold different status and HMRC evidently do not accept that they can work long term as self employed.

Re: locum limited company

Neil Wheadon — Sun, 28 Jun 2015 18:11:41 GMT

[quote user="Evelyn Barbour-Hill"]Take-home pay is £32540[/quote]

Agreed. The point I was trying to make is that unlike an employee there are 2 further cuts to your pay. Admin and employers NI, however the latter may not apply as you quite rightly pointed out, in which case I'd be asking that who invoices the practice question?

Neil

Re: locum limited company

Evelyn Barbour-Hill — Sun, 28 Jun 2015 18:08:22 GMT

[quote user="Neil Wheadon"]Total earned in the year = £32540 (£138/day)[/quote]

Ackshly, total earned in year is £45120.

Take-home pay is £32540.

Sounds pretty good. (Not saying you couldn't do better.)

Re: locum limited company

Neil Wheadon — Sun, 28 Jun 2015 18:07:39 GMT

[quote user="Evelyn Barbour-Hill"]I absolutely don't follow this. Have I missed something? Is the umbrella company employing Silvia or isn't it? Employer's NI is just that: it's not legal to claw it back off the employee.[/quote]

You might be right

I just see an Umbrella Company as a way to dip in and out of this type of employment, where the practice is removed from being responsible for NI contributions and any issues taxation wise in the future.

The questions I would ask is Is the £192 the rate that the practice is paying the locum, or is the £192 the rate that the Umbrella Company is paying the locum. To be honest £192/day is an odd figure, so if the Umbrella Company is charging the practice say £220/day (Which almost fits the NI maths) then there may be something peculiar happening here, where employers NI shouldn't be being removed

Neil

Re: locum limited company

Neil Wheadon — Sun, 28 Jun 2015 18:00:32 GMT

Rough back of the envelope calculation

£192/day

5 days a week, 47 weeks a year = £45120

NI removed at 12.6% = £5685.12

Amount left = £39435

Umbrella admin fee £6x5x47 = £1410 (about the price of a good accountant)

Amount left = £38025

Tax free allowance = £10600, therefore tax on £27425 at 20% = £5485

Total earned in the year = £32540 (£138/day)

Compare this to normal salaries and you'll have longer days travelling and draw your own conclusions (assuming you work 47 weeks a year that is )

Neil

Re: locum limited company

Evelyn Barbour-Hill — Sun, 28 Jun 2015 17:58:49 GMT

[quote user="Silvia Maldonado"]I guess, as Evelyn mentioned in a previous post, that if I-m overpaying taxes, I will eventually get some back by April [/quote]

Yes, or May perhaps, assuming that this Umbrella company makes its real-time and end-of-year submissions to HMRC accurately and gives you a correct P45.

[quote user="Neil Wheadon"]2) They have charged you employers National Insurance as well. Now I don't understand Umbrella Companies but as a Ltd Company employing yourself, you are liable for this too and so this is legitimate. If you were employed your employer pays this and you don't realise this. As you now gone down the Umbrella Route someone has to pay this and this has to be you.[/quote]

I absolutely don't follow this. Have I missed something? Is the umbrella company employing Silvia or isn't it? Employer's NI is just that: it's not legal to claw it back off the employee.

Re: locum limited company

Neil Wheadon — Sun, 28 Jun 2015 17:38:40 GMT

OK here goes (I'm not an HMRC expert

Your tax code is 1060L, this means you have £10600 tax free allowance which is the 2015-2016 figure

It looks very much like you P45 tax rate was very very low (from your previous employer (Tax to date 713.06 - 302.71 = £410.29) Therefore your previous employer took out a really low amount of tax.

Your pay from your current assignment is £960 (if you add up the 4 figures, current and holiday) so this agrees. From this they have taken an incredible £302.71 tax, meaning that you've been taxed at 31.5% rather than 20% which is maybe what they should be doing with your tax code. However yes you will get any tax owed back in April, provided you tell the tax office. You have to consider that you have grossly underpaid and subsequently now overpaid. I expect they may be building in you working for them long term and so assuming you'll hit the 40% tax threshold, not such a bad thing

The sting though is the

1) Administrative fee. £30 is a reasonable amount, they've been upfront about this and seems reasonable (£6/day) and I would expect this to be continued

2) They have charged you employers National Insurance as well. Now I don't understand Umbrella Companies but as a Ltd Company employing yourself, you are liable for this too and so this is legitimate. If you were employed your employer pays this and you don't realise this. As you now gone down the Umbrella Route someone has to pay this and this has to be you.

So to conclude, I retract my statement that the Umbrella Company has overdone their charges, they haven't £6/day is reasonable. What you haven't realised is that at £192 you simply haven't charged enough as there are more deductions than meets the eye.

There you go

Neil

Re: locum limited company

Evelyn Barbour-Hill — Sun, 28 Jun 2015 17:23:45 GMT

[quote user="Silvia Maldonado"]I'm attaching a copy of this last payslip, with all those odd figures, if anyone understands them. [/quote]

I don't understand them!

Re: locum limited company

Silvia Maldonado — Sun, 28 Jun 2015 16:32:52 GMT

Yes, you are right, I gave them my last P45. It includes 5 shifts in 2 places, and the media would be £192. I still have to send 4 days shifts at £220 each, and I-ll be doing 11 more shifts before I start on my looking forward permanent position, back to my quiet, normal, "within my comfort area" life. What really worries me is the tax issue, if they are not done properly. But obviously I'm concern I work so much to earn £506 on my busiest week

I guess, as Evelyn mentioned in a previous post, that if I-m overpaying taxes, I will eventually get some back by April

Re: locum limited company

Neil Wheadon — Sun, 28 Jun 2015 15:25:24 GMT

There's something weird going on with your tax. Looking at the totals to date, you have paid less than 20% so can only assume you've given your p45 from your last employment, and they have been taxing you assuming you have a personal allowance. The umbrella company have taken a larger percentage of tax out, so this will in part explain the decreased money expected. How many days did you locum and what was the daily rate? Neil

Re: locum limited company

Silvia Maldonado — Sun, 28 Jun 2015 14:41:03 GMT

Thanks so much, Evelyn. All the info you are sharing with me is really helpful. I'm feeling more lost than a priest in a cat house Certainly, a couple of weeks will not make much changes.

As for the option of doing it myself, Is it what is called "pay your self assessment"? https://www.gov.uk/pay-self-assessment-tax-bill

I'm attaching a copy of this last payslip, with all those odd figures, if anyone understands them. Any advice is more than welcome

Re: locum limited company

Neil Wheadon — Sat, 27 Jun 2015 22:29:33 GMT

Evelyn and I look to be saying broadly the same thing, however to me the take home message seems to be 'Beware of using an Umbrella Company' this isn't the first time I've heard a shocking tale where they seem to make more than the vet does. Most practices are happy with self employed status and I would advise any 'temporary' locum to go down this route. I went down the ltd company route this year, but then again as a vet doing this for 4 years and intending retiring as a locum it seemed a sensible move as a few practices are now insisting on Ltd or Umbrella status and I didn't want to limit my options, though a Ltd company is harder work to manage than self employment. Neil

Re: locum limited company

Evelyn Barbour-Hill — Sat, 27 Jun 2015 22:19:43 GMT

[quote user="Silvia Maldonado"] "I have spoken to payroll and it seems that the reason is your expenses. There does not seem to be a high amount coming through, which means the more put through reduces your tax and NI significantly. Also because you are classed as a high earner you are also liable for ENI which is billed back to the worker which is stated in the contract"[/quote]

I've read this five times and I still can't make sense of it. However the last sentence suggests to me that you have a lousy contract. Indeed, if ENI stands for employer's national insurance, I'm not certain that it's legal.

[quote user="Silvia Maldonado"]Should I ask this vet practice to be put in their PAYE, when I will be working for barely a week?[/quote]

You could ask, but it means more hassle and more expense (employer's national insurance) for them so don't be upset if you get a refusal.

It seems to me that you are stuck with this umbrella company even though your net income is much less than you expected, until such time soon as you can end the contract. Have you had a proper detailed statement from them, one that shows everything? (If not, demand one) Look at it closely, or get someone else to. It may well be quite correct, according to the contract anyway.

But, you know, you are starting another permanent position mid July anyway. Do a couple of weeks of less income than you expected matter so much? And if it's just a matter of paying too much income tax, it should all be returned to you eventually, whether through your code or in a lump sum tax refund.

Re: locum limited company

Neil Wheadon — Sat, 27 Jun 2015 21:55:11 GMT

[quote user="Tim Mainland"]

[quote user="Utlendigur"]

[quote user="Tim Mainland"]An umbrella company is usually owned and run by the locum personally. [/quote]

Don't you mean "a limited company is usually owned and run by the locum personally"?

[/quote]

I was following Silvia's terminology. I think the semantics are minor here...We're talking about the same thing

[/quote] Apologies on an Ipad so it'll all merge. 1) An umbrella company and limited company are miles apart. An Umbrella is run by a third party and they will take a cut of what you earn to do the taxes. For this you will pay a premium which sounds like it may have happened here. A Ltd company is the locum company for which we have an accountant and we look after our own tax affairs 2) Your options are limited. I expect your earnings so far will have to go through the umbrella company, so you'll have to grin and bear that 3) DO NOT LET THE PRACTICE DOWN to whom you are obligated just because you can't get your personal finances sorted, it's not their fault. Talk to them and go PAYE with them, I expect they will help out. If you can't you'll have to stay with the Umbrella company, your word is your bond, don't forget that. Neil

Re: locum limited company

Tim Mainland — Sat, 27 Jun 2015 17:19:33 GMT

[quote user="Utlendigur"]

[quote user="Tim Mainland"]An umbrella company is usually owned and run by the locum personally. [/quote]

Don't you mean "a limited company is usually owned and run by the locum personally"?

[/quote]

I was following Silvia's terminology. I think the semantics are minor here...We're talking about the same thing

Re: locum limited company

Utlendigur — Sat, 27 Jun 2015 17:02:17 GMT

[quote user="Tim Mainland"]An umbrella company is usually owned and run by the locum personally. [/quote]

Don't you mean "a limited company is usually owned and run by the locum personally"?

Re: locum limited company

Silvia Maldonado — Sat, 27 Jun 2015 16:53:22 GMT

Thanks, Tim. I have already sent the practice an email with my concerns and, because I have a week to sort it out, I'll contact HMRC first thing on Monday, and see how I can do it all myself. It might not be money worthy, ibuprofen worthy, but it will be definitely experience worthy (needless to say it is my first time working as a locum )

Thanks for all your advice, team

Re: locum limited company

Tim Mainland — Sat, 27 Jun 2015 16:42:19 GMT

[quote user="Silvia Maldonado"]

So should I ask the practice to pay me directly and then try to sort the taxes out directly with HMRC? Just don't want to end up in Alcatraz like Al Capone for not paying my taxes properly

When you say that I'll get my tax bill, Does it mean that HMRC will send me some sort of tax bill and I just have to pay them?

[/quote]

An umbrella company is usually owned and run by the locum personally. I'm guessing then that you are using an agency and paying them fees to do the tax bit.

I suggest you get an accountant!! Stay street legal and get the job done properly and by somebody who is working for you.

Good luck!

Re: locum limited company

Silvia Maldonado — Sat, 27 Jun 2015 16:32:37 GMT

So should I ask the practice to pay me directly and then try to sort the taxes out directly with HMRC? Just don't want to end up in Alcatraz like Al Capone for not paying my taxes properly

When you say that I'll get my tax bill, Does it mean that HMRC will send me some sort of tax bill and I just have to pay them?

Re: locum limited company

Hannah Wynne Richards — Sat, 27 Jun 2015 16:22:57 GMT

That's tax for you. You could do without the umbrella company, and have the practice pay you directly, but then eventually you'll get your tax bill.

Wynne

Re: locum limited company

Robin Grimmer — Sat, 27 Jun 2015 16:19:14 GMT

Crikey! Haven't got any experience of umbrella company as I was self-employed and now Ltd company. But if you're losing almost half your pay, you'd be better off on paye.

Re: locum limited company

Silvia Maldonado — Sat, 27 Jun 2015 15:41:11 GMT

Sorry to annoy everyone. My headache is on the verge of driving me mad. I have recently left a permanent position, and I will start on another permanent position by mid July. However, I have been doing some locum shifts these past weeks, and I am not happy at all with the umbrella company I contacted. In short, I have been sending the UC my invoices and expenses, doing hundreds of miles, and being paid much less than when I was in PAYE. In figures, my last week's invoice was: a gross income from the vet practices of £960 (5 day's work, and 57h because 3 were night shifts), and I have received £506 (52% of it)

This is the second payslip I received from them. After my first payslip I requested to be explained why such a big difference, and I was literally emailed that (copy and paste) "I have spoken to payroll and it seems that the reason is your expenses. There does not seem to be a high amount coming through, which means the more put through reduces your tax and NI significantly. Also because you are classed as a high earner you are also liable for ENI which is billed back to the worker which is stated in the contract"

I am really worried because I still have to send a 3rd week I have already worked (4 shifts), and I have a vet practice waiting for my call to confirm that I will cover 10 days as locum. I should have called them already, but I don't dare committing myself to covering their shift when I'm seriously thinking of quitting the UC but, on the other hand, I do know how hard is to find a vet in the summer, and that they are struggling to find someone. So my questions are:

Is it normal that you are paid so little as a locum?
Could you recommend any good UC to do these few shifts?
Any vet locum available in Somerset, in case this situation ends up badly? I would feel awful if I let down this vet practice (they are lovely and really friendly, by the way), for day shifts.
Should I ask this vet practice to be put in their PAYE, when I will be working for barely a week?
Any other advice?

Keep reading all your post, fingers crossed I find some useful answer to my concerns. Cannot do much on a Saturday, I guess... Regards,

Silvia.