Over the last few years the use of Umbrella Companies has become more popular within the contracting market.

Umbrella Companies are popular because they take the hassle out of tax and administration responsibilities. You simply register online with your chosen Umbrella service provider. To complete your registration you will need to send in a copy of your passport and visa and your P45 or P46.

Once you are a registered client, you simply log your timesheets online and send in expense claim forms. It’s that simple. Your Umbrella Company takes care of all the administration including processing your payment after making the correct deductions and paying the correct taxes to HMRC. This leaves you free to focus on finding those opportunities and doing the work.

But how can you be sure you are entrusting your hard earned money to the right Umbrella Company?

Deon Smit, 1st Contact Umbrella Manager, offers these 10 tips for selecting the right Umbrella Company to partner with:

Experience

Only consider an Umbrella Company that has been in operation for a number of years. 1st Contact has been assisting contractors with payroll services since 1996. Be wary of any new companies as you run the risk of losing all your money to a fly-by-night operator.

Reputation

It’s all good and well if a company has been operating for years; but what if they’ve been operating badly? Scour the net for blogs and information and speak to longer established contractors about their experiences with Umbrella Companies – the good, the bad and the ugly.

Easy online system

Make sure that your Umbrella service provider has a simple online system that you can easily manage. There’s no point in using an umbrella provider to avoid admin, only to have to spend hours figuring out their complicated registration and submission systems.

Personal service

As important as an online system is, make sure that when you need to speak to a real, live person, one is available to you. 1st Contact Umbrella provides a free consultation with a professional consultant and their telephone lines are open from 8am to 5pm Monday to Friday. They also make it their business to answer all payroll related email queries within 3 working hours.

Fee structure

It is extremely important that you establish upfront that there are no joining fees and no exit fees. Ask the Umbrella Company to provide you with a full schedule of fees to ensure that you aren’t overcharged.

Insurance

What happens if your service provider goes bankrupt? Always ask about the insurance policy to be 100% sure that you will receive your money, no matter what. Your Umbrella Company should have public liability, employers’ liability, and professional indemnity insurance cover.

Expense policy

Some companies may claim an extensive claims policy, but the conditions attached are so extreme that the likelihood of you actually claiming is pretty slim. Do your research and ask as many questions as possible. Avoid any company that states that you don’t need to prove your expense claims – if HMRC does query your expenses and you cannot provide the necessary receipts, the tax liability could fall on you.

Employee benefits

Does your Umbrella Company give you the option of employee benefits such as sick leave and maternity leave? Well established companies like 1st Contact Umbrella can offer you fantastic employee benefits while you enjoy the freedom of working for yourself.

Payment dates

Does the scheme have fixed payment dates you can rely on? Be sure to find out what the payment methods and schedules are and make sure the answers are not vague. You want to know exactly what their payment policy is, so that you have recourse should the timelines not be met.

Relocation costs

Lastly, find out about other benefits. For instance, with 1st Contact Umbrella you can claim relocation costs if they are your first employer when you arrive in the UK. You could be in a position to claim the costs of your flights, shipping, 6 weeks’ accommodation. In fact, up to £8000 could be claimed to give you a tax benefit and in turn increase you net pay. Terms and conditions do apply, but this is a fantastic benefit you are not likely to see elsewhere.

We hope these tips have been of use to you. If you have any questions related to contracting in the UK, Umbrella Companies or the setting up of a Limited Company, visit www.1stcontact-umbrella.com or speak to an experienced and professional consultant by calling 0808 178 8634.

1st Contact Umbrella has successfully assisted over 100,000 clients with our no-hassle, efficient payroll service.

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Corporation tax

Small businesses (companies with profits of less than £300,000 per annum) will benefit from a reduction in the Small Profits Rate of corporation tax, decreasing from 21% to 20% as of April 2011.

The standard rate of corporation tax will also decrease to 27% from April 2011. This decrease will be followed by a 1% annual reduction every year over the next 3 years, to reach 24% by April 2014.

VAT

The standard rate of VAT is to increase to 20% from the 4th of January 2011, while sectoral rates for the Flat Rate scheme will increase at the same time. There will be no change to zero-rated and exempt items.

Capital gains tax

The annual exemption of £10,100 will remain unchanged for the foreseeable future. The tax rate for basic rate payers remains at 18%, while the rate for higher rate taxpayers increases from 18% to 28% from midnight 22 June 2010. A further change is that entrepreneurs’ relief at 10% will be extended from the first £2 million of gains to the first £5 million.

Income tax

There will be a £1,000 increase in Personal Allowance for tax to £7,475 with effect from April 2011, while the higher tax/NI rates will kick in sooner to offset the Personal Allowance increase for higher earners.

National Insurance

The increase in employers’ NI contributions will not go ahead as planned. Instead, the threshold for employers’ NI contributions will rise by £21 per week above inflation.

Small businesses in certain areas, set up over the next 3 years, will be exempt from the first £5k of employer’s NI on up to 10 employees’ wages.

For advice related to your small business’ tax issues, speak to a 1st Contact finance consultant by calling 080 8141 1657 or email info@sablewealth.com.

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• The first change is that you will no longer receive your IRP6 form in the mail as SARS will no longer be issuing these printed IRP6 returns. You now have the choice of registering for eFiling, calling the SARS Contact Centre or visiting your nearest South African Revenue Services branch.
• A new IRP6 return has been introduced, which is available in both Adobe Reader and Adobe Flash Player. The flash player format offers a fantastic performance and user experience. You may wonder how one can mention fantastic experience and tax return in the same paragraph, but when you see that the document automatically performs tax and rebate calculations and includes built-in upfront field validations when filing as an individual, you will understand why!
• From now on, any taxpayer can request an IRP6 return – even those who are not yet registered as provisional taxpayers.
• From now on, you will only need to submit your IRP6 in the event that you are in fact liable for provisional tax. If not, you will not be required to make a submission.  But do be warned that if at the time of assessment it is determined that you were actually liable for provisional tax, penalties and interest may be levied.

• SARS has also introduced a new Provisional Tax Statement of Account, geared towards helping you with managing your tax affairs.

Existing IRP6 returns on eFiling

For companies with financial year ends of December, January, June and July with IRP6 returns due, the IRP6 returns will be treated as follows on eFiling:

• If the old format IRP6 has already been issued to your company on eFiling, the return can still be captured and filed. If you prefer, you can simply ignore the old format IRP6 and request the new format instead.
• If the old format IRP6 hasn’t been issued, then you must ask for a new one.

If you have posted an old format IRP6 to SARS

From the 28^th of June 2010, any old format IRP6 returns posted to SARS will be rejected for periods before 2009 and periods from January 2011 onwards.

Old format IRP6 returns posted to SARS for periods from January 2009 until February 2010 will be only be accepted until 1 August 2010, after which time all old format IRP6 returns received for these periods will be rejected.

In these instances, you will have to request and submit a new IRP6.

“The changes to the provisional tax process have now shifted the onus from SARS to the taxpayer to ensure they meet all the tax requirements” says Pieter Carstens of 1^st Contact’s SA Tax Division.  “This adds enormously to the taxpayer’s responsibilities and I would strongly recommend that you speak to a tax advisor if you are unsure of your tax requirements.”

We hope this has been of use to you. If you have any questions at all relating to SARS, provisional tax or the South African tax system, please contact the 1^st Contact SA Tax office on 021 657 2190 or visit www.1stcontactsatax.com.

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Apart from a few less than impressive performances in the first few games and the “great Vuvuzela debate”, the event seems set to be a huge success.

If you’re heading to SA at any point during the next month, here are some tips and advice gathered since the kick-off:

Here’s to the next few weeks! We won’t venture a guess as to the World Cup winner at this stage, but we will say, for sure, that this World Cup is alreay one to remember!

For more information on the country, go to www.1stcontact.com

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Did you know?

• One in 3 people in the UK are due a tax refund!
• There is over 3 million Pounds in unclaimed tax held at the Inland Revenue office!
• You can claim overpaid tax for up to 5 years!
• 1st Contact Tax Refunds works on a “No rebate, No fee” policy!
• The average amount of tax claimed back is £850!

Is there a Substantial Sum of Money Waiting to be Claimed by You?

1. Have you paid Emergency Tax in the last 5 years?
2. Have you left the UK before the end of a tax year (6 April to 5 May)?
3. Have you had more than 1 employer in a tax year?
4. Have you worked for only part of a tax year?
5. Have you been on an incorrect Tax code at any point in the last 5 years?
6. Have you had two or more jobs concurrently?

If you answered YES to 1 or more of the above questions, there’s a good chance you are due a refund!

What Next?

Call a 1st Contact Tax Refund Consultant on 0800 856 2471 as soon as possible.

Even with our efficient service and our direct line to HMCR, it can take up to 6 weeks before you get your hands on the pounds due to you. So let’s get the ball rolling today!

Before you Call…

Here is some information which will be useful to know before you speak to a friendly and experienced 1st Contact Tax Refund Consultant:

• You will need to give exact information of the companies you have worked for in the previous 5 tax years.
• You will need to supply P60’s and P45’s from these jobs.
• If you don’t have P60’s or P45’s from your previous employers, a 1st Contact Tax Refund consultant can assist you by applying for these on your behalf.
• If these cannot be obtained, you will need to obtain a Statement of Earnings from the HR Department of the companies you worked for.
• You will need to supply us with your National Insurance number.
• If you don’t have a National Insurance number, you will have to apply for and receive your NI number before you can claim back your overpaid tax. A 1st Contact Consultant can help you with that too!

Draw up an Action Plan!

Why not put together a list of the things you need to do in order to claim back your money? Then collate all the information you need and call us on 0800 856 2471.

We’ll fill out all the necessary documentation over the phone, submit your claim to HMCR and then keep you up to date with your claim process.

Start Your Tax Refund Claim

Claim Your National Insurance Rebate

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IR35 was first implemented in 2000 as a way to close a tax loophole which allowed contractors to pay reduced tax and NI by offering their services through a limited company. In some instances, contractors were on permanent contracts or recurring contracts – basically working full time for a single employer. This was viewed by the governement as tax evasion, and IR35 was introduced. Unfortunatley genuine contractors were also placed under IR35 legislation, effectively treated as tax evaders and taxed heavily on their freelance income.

“It would  be great to see this piece of legislation removed. It created an enormous amount of confusion, and was never the viable solution it was intended to be” says Raymond Ridgeway from 1^st Contact Umbrella.

“The government has said that it would “seek to replace it [IR35] with simpler measures that prevent tax avoidance but do not place undue administrative burdens or uncertainty on the self-employed, or restrict labour market flexibility.”

A clear cut piece of legislation will help hundreds of thousands of contractors to know and understand where they stand with regards to their tax. Businesses like 1^st Contact Umbrella will also be able to  to provide consistent, clear-cut answers to their clients. We look forward to seeing what happens and welcome the change!”

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1. Do your homework

So you’re thinking of going it alone? It could prove to be the most rewarding decision you make, but not being properly prepared can also make it a costly mistake. Our first tip: research, research, research! Find out just how saturated the market is and what opportunities actually exist within your particular field; talk to other contractors about their experiences; check job boards and industry-related forums to get an idea of what’s really happening “out there” in terms of opportunities, rates and trends.

Find out as much as you can, so that you are in a position to make a truly informed decision.

2. Decide on your services

This may seem easy enough – but have you explored all the possibilities? You may only have practical experience in your field, but your knowledge and personality might also be suited to consulting, for example. Make a list of all your skills, as well as all the experience you have. Then narrow your services down to the most lucrative, realistic and relevant.

3. Know who your market is

You might think it’s “anyone who needs a plumber” but the more specific you are about the business you want, the more likely you are to find it. Decide on the geographical area of business; think about the industries you’d like to target and the types of people you’d like to work with; establish if there are any gaps in the market, where you could slot in.

4. Establish your rates

Work out what your rates will be. Take into account the competitive environment, your particular skill set and experience, as well as the particular market you will be targeting.

5. Secure your start-up capital

You’re probably thinking you don’t need any start-up capital, as you don’t have any overheads… but are you sure? Will you need any additional tools or equipment when you go it alone? Will there be any additional expenses when you start working for yourself? Are you planning to create an identity and print business cards? Will you need to spend some money to market yourself effectively? Will you need some money in the bank to carry you through the first few weeks/months?

6. Set your financial goals

How much will you need to make in order to survive or better yet – improve your quality of life? How many projects / hours’ worth of work will you need each month? Does it seem realistic?

7. Write your marketing plan

How are you going to market yourself to your prospective clients? How can you stand out from the rest? What are the most cost-effective ways to reach the right people? How can you tap into your existing network and let it work for you? Will you find work through agents alone or would you rather make maximum profit by finding contracts for yourself? Ask yourself these and other questions and then establish exactly what your marketing strategy is going to be. Also consider how you are going to portray yourself and your services. What is your tone of voice; what are your values; how is your service different from that of the competition? Make sure you have an attractive, up-to-date, high impact CV in both printed and electronic format. This might be the only opportunity you have to make a good impression – so do ensure it represents you accurately.

8. Work out your timeline

Still feeling like this is a good idea? Great! Now it’s time to work out when you can – realistically – make your escape from the 9-5 world. Taking into account your financial needs, seasonal trends in your industry and any other influencing factors, decide on a date by which you will be a freelancer. Then work backwards and plan your resignation (if applicable), any savings you’ll need to put away and when you will need to start networking aggressively, print business cards, market your services, etc.

9. Get your admin in order

For legal and financial reasons, it’s important that you have your admin in order from the word go. Rather than sifting through reams of papers or surfing dozens of pages on the internet, why not contact a professional and make your life easier? 1^st Contact Accounting specialises in helping contractors in the UK. Their services include Limited Company services, contractor payroll advice and services, as well as tax and accounting services for contractors. See http://www.1stcontact-accounting.com for more information.

10. Start visualising your success!

Once you have followed all the above steps and you really believe this is the way forward for you… keep your goals top of mind. Follow your timeline and adjust it where necessary. Stay positive and use all the resources available to you. As the big day draws nearer, you will be more and more ready for the change, because you will have spent the last few weeks (or months) preparing!

GOOD LUCK!

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Setting up a Limited Company

Setting up and running a Limited Company, where you are a director and shareholder, while being a big responsibility comes with many tax benefits. You can, for instance, claim back on a wider range of expenses, including accountancy fees, travel costs and services and equipment needed by you to run your business.

Another advantage is the ability to register for the flat rate VAT scheme, which allows you keep some of the VAT you receive from your clients. You also have complete control over your finances.

Scott Brown from 1^st Contact Accounting gives this advice:

“If you fall outside of IR35, setting up a Limited Company may be the best option for you. But be warned – it often involves an enormous amount of monthly and annual paperwork and requires that you are highly organised in admin matters!”

If this feels like the right option for you, be sure to partner with a reliable accounting firm from the onset, as this is the only way to ensure your accounting and tax matters are always under control. 1^st Contact Accounting provide accounting services specifically for contractors and Limited Companies and can also assist you with the hassle-free setting up of your Limited Company. Go to www.1stcontact-accounting.co.uk for more information or for a free consultation.

Umbrella Payroll

The second option you have is to work through an Umbrella Payroll company. This is often the easiest option for Contractors, particularly for first timers and for contractors who might go back to permanent employment after a brief contracting period.

The main benefit of using an Umbrella Payroll system is the huge reduction in admin! An efficient Payroll company like 1^st Contact Umbrella will have an online system with facilities that allow you to do everything from filling in timesheets to submitting your expenses.

With 1^st Contact Umbrella, you can enjoy many of the benefits of being a permanent employee, with all the freedom of a contractor lifestyle” says Scott Brown. “There are also many advantages that people aren’t aware of, including the option to receive sick pay, leave pay and maternity pay – benefits normally reserved for those who are permanently employed.

Brown had this last bit of advice for contractors:

“The best thing to do is consult with an expert before you make your decision. Everyone’s circumstances are different and there are many factors to consider. A 1^st Contact Accounting or Umbrella consultant will be able to analyse your situation and help you to make the very best decision for you.”

Contact a consultant at www.1stcontact-accounting.com or www.1stcontact-umbrella.com or call 0800 856 2477

Limited Company Vs Umbrella Payroll Company

Umbrella Payroll VS Limited Company

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But leading migration and financial services group 1st Contact has come up with a solution that will not only save you a lot of trouble but money too.

It’s called the “Travel Money Card” – a sleek, black, easy-to-use Prepaid Mastercard, which works like your regular debit card, only loaded with the Forex of the country you’re visiting.

Travel Money Card

Each card is designed to load one particular currency, Sterling, US Dollars or Euros for easy use in shops, theatres and restaurants.

The exchange rate is totally secure, remaining at the rate it was the day you loaded the money onto the card for the entire time you use it. 1^st Contact’s Forex Manager Ernst Janse van Rensburg promises you will receive the best travel exchange rates available, guaranteed!

To ensure you get the most of your hard earned money, the “Travel Money Card” does not have any charge for purchasing transactions. There is also no commission levy when you either load or pay in countries outside of the United Kingdom and it only takes a nominal amount to withdraw from the ATM.

The chip and pin system makes this card one of the safest ways to carry money around on your travels, and if you inadvertently lose it, it only takes a quick text message to cancel the card.

Its easy-to-load system online and via text means that you don’t have the hassle of waiting in queues, making your traveling experience quicker and easier all round.

For more information, contact 1^st Contact Forex on http://www.1stcontactforex.com/

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The tax free threshold of £6,475 will no longer apply for earnings above £100,000 per annum. For most high income earners, this means missing out on thousands of pounds of tax free income that is currently protected by the zero rate income tax bracket.

An example:

£100,000 income
£6,475 personal allowance taxed at 0%
£37,400 taxed at 20% = £7,4800
£56,125 taxed at 40% = £22,450

Total tax = £29,930

£110,000 income
£0 personal allowance taxed at 0%
£37,400 taxed at 20% = £7,480
£72,600 taxed at 40% = £29,040

Total tax = £36,520

This means taxpayers are liable for £6,590 tax on the £10,000 earned over £100,000.

What can you do to avoid coughing up?

“One way to avoid this higher rate tax is to ensure you fall below the new £100,000 threshold.” says Raymond Ridgeway, Commercial Manager at 1^st Contact. “This can be achieved in numerous ways depending on your tax structure.”

If you work through a Limited Company

“As a director of a limited company, the most tax efficient option would be to draw fewer dividends from the company so that you do not exceed the tax threshold. Contributing to a UK pension fund through your limited company fund by means of a salary sacrifice means that you can also save the employers and employees NI that would otherwise be due.”

More info on Limited Companies

If you work through an Umbrella Company

“If you work through an Umbrella Company like 1^st Contact Umbrella, the most suitable solution is to claim business related expenses.” say Ridgeway. “This will enable you to reduce the amount of taxable salary and therefore your potential taxes. By asking your Umbrella Company to contribute to a pension you are also able to reduce the potential taxes and keep your tax able salary below the £100,000 tax bracket.”

More info on Umbrella Companies

1^st Contact specialises in Tax, Finance and Migration and can be contacted on 0808 141 1663 (from within the UK) or 0207 759 7510 (from outside the UK) or by visiting www.1stcontact.com

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