One of the 2 agencies that I drive for has recently ditched its own payroll in favour of an umbrella company who now process wages and pay us almost as before.
I say almost, but the following subtle changes have occured.
a) Legally I work for the umbrella company now and not the agency.
b) Pay slips now show no detail of how the gross pay figure was arrived at. They used to show number of hours at the different hourly rates, followed by total for each, then a grand total gross wage before any stoppages.
c) 6% of each week’s gross pay is deducted as fees but not shown as such. (Strangely hidden, and took me quite a while to twig their magic illusion). But it was probably in the small-print that I signed as a contract.
d) Tax allowances are then given for claimed expenses of food and car milage etc.
As my other agency is the one where my P45 resides, my gains via this umbrella company have always (so far at least) outweighed the 6% cost of this change in pay arrangement, but it wouldn’t necessarily be beneficial for every agency driver especially if they only worked 1 or 2 days a week for just 1 agency and their yearly earnings weren’t much more than their personal tax allowance. This would be even less beneficial for people claiming low daily mileage. You get stung for 6% of gross pay anyway, so you could actually take home less net pay via the umbrella company route than previously.
What other experiences and opinions, good or bad do other drivers have of similar schemes?
Agency 1 has my P45 and pay me via normal payroll. So I use up all of my yearly personal allowance here.
Agency 2 pay via umbrella company who have a P46 and allow tax relief for meals and mileage etc. But I am taxed on all of the rest except for what they deduct as fees. (Their 6% cut of gross earnings).
I’ll have to ask agency 1 if they can pay via umbrella company as well, but the way I see it, if they agree to do that the taxman will lose even more in allowancies, so at present I should be safe from him coming calling.
Chris DB:
Earnings from my 2 agencies are roughly 50/50.
Agency 1 has my P45 and pay me via normal payroll. So I use up all of my yearly personal allowance here.
Agency 2 pay via umbrella company who have a P46 and allow tax relief for meals and mileage etc. But I am taxed on all of the rest except for what they deduct as fees. (Their 6% cut of gross earnings).
I’ll have to ask agency 1 if they can pay via umbrella company as well, but the way I see it, if they agree to do that the taxman will lose even more in allowancies, so at present I should be safe from him coming calling.
Would check your o/k with this right away as the tax man may declare you are not self employed and demand your expenses back at end of year.
Any experts can jump in here if they like.
Think drivers in general think these companies are robbing bassas.
Lot cheaper to get your own accountant than to pay their fees.
Think you need to be paying a third of your wages in expenses or you lose out and you need to earn 3 or 4 hundred at least.
The way things currently stand you effectively have 2 employers, Agency 1 and the umbrella company.
Umbrella companies work on the basis that you are an employee and because you are working various temporary site you can claim the tax relief for your travel and food (called a subsistence allowance).
The umbrella will receive the money from the agency and after deducting their fee they will split the money in two - first the expenses which are tax free, the rest is then salary + holiday pay which are subject to Employers NIC, Employees NIC and income tax.
Very often the pay slips are unclear as they tend to only show your salary (after employers NIC) and expenses but not the gross fee from the agency or the umbrella charges and this makes it hard to spot any errors.
Normally the tax saving from the expenses is enough to cover the umbrella companies fees and put extra cash in your pocket.
However you should be aware of a couple of things:
If the umbrella gives you “Dispensation” allowances for food it means they don’t need receipts BUT you do incase the tax man does a audit. If you can not support the claim with receipts you could have to pay the tax back plus penalties. HMRC do have the power to retrospectively withdraw these dispensations.
The government has recently announced a consultation into these arrangements and like the composite company laws last year it is very likely that these schemes will be outlawed in the next budget (April 2009).
You would probably be best to consolidate your agency work into one solution which would in the end be the simplest and most tax efficient way to go.
Your choices are consolidate under the umbrella (but only short term solution) or set yourself up with a Limited company or as Self-employed.
I do a lot of work with drivers so pm me if you want more info or a chat.
I found this - Alert have an agency, sorry, recruitment section…
instructorone:
As you know, we work with the J.S.A Group who act as your accountants.
If you work say, as an example, 50 hrs at £10.00 ph, that gets broken down. It works as: 50 @ £10.00ph = £500.00, they take 50 x £5.52 for national minimum wage which = £276 , that is tax deductable. The other £224 is offset against your tax with fuel for travelling to work, £25 a night late working (Night Out) or £15.00 for being out your home for 10 hrs or more, and £7.50 for meal allowance. £3 for using your office as a work place, Receitable expenses I.E hotels, and 6% of your wages, capped at £30.00 for their charges. One driver did, but its NOT a quote, 1x 12 hrs, 1 x 13.00 hrs, 2 x 13.25 hrs, 1 x 12.50 hrs, and 8 hrs for running in on Saturday. With the nights out that we pay him, (Separate from the £25 that is offset against his tax) his top line was just above £828.00 and he took home just over £692.00. however, JSA had made a mistake and charged him £18.50 tax on his nights out, so they owed him that back which would of taken his take home to just over £710.00, so Aranger, i believe you wont be dissappointed with your wages.
Umbrella companies are best treated like a nest of vipers, every contact you have with them think cynically, they are in it to make a profit after all.
You have to get very good at sums, I’ve yet to see a pay slip that makes clear sense.
Please remember all umbrella companies are not created equal, what they say they can do and what they actually do are rarely the same, particularly with regard to expense claims.
Time spent finding a good accountant is never wasted, treat it like you are interviewing them for a job!
Hope this helps!
Slightly concerned by those figures. no mention of holiday pay which is mandatory or the fact that employers NIC of 12.8% will be applied to the taxable earnings over £105 p/wk.
Minimum wage: £5.52 X 50 = £276
Holiday pay: £276 X 10.17% = £28.07
Employers NIC: £25.48
Their Fee: £30
Therefore you need to earn a minimum of £359.55 per week before any expenses are allowable.
Using the example of £500 gross that leaves a possible £140.45 for expenses (not £224).
The maximum take home if you can justify the £140.45 expenses (86 miles a day commuting to work) is £383.01
The same person working self employed would take home £443.13
JSA are a well know player in the umbrella market but not a great endorsement that they’re making mistakes and charging tax on night out expenses?
A good read that for someone like myself who blindly sign up with £££ signs running through their heads.
Looks like it will be getting either strictly controlled with the worker liable for any abuse by the umbrella companies or scrapped altogether.
The agency I am with are happy to go with self employed so how easy would this be. ?
Is it a case of making an appointment with a decent accountant. ?
To be honest due to my location and me telling the only company close to me to shove their job I struggle to pay the bills after deducting my fuel which can be about £80, so I would be limited to tramping which would cut my fuel expense.
Aranger setting yourself up is easy and several ways you can do it in a day.
To be honest due to my location and me telling the only company close to me to shove their job I struggle to pay the bills after deducting my fuel which can be about £80, so I would be limited to tramping which would cut my fuel expense.
Because umbrella’s are PAYE based they can only save you tax via manipulation of expenses. When your self-employed you do get your genuine expenses but also you get other tax structures and can use things like the Flat Rate VAT scheme to reduce your overall tax liability.
Sorry to bring up old subjects but when you guys that are new to umbrella companys etc make sure that the relationship you have with the client is the one that you think you have in relation to Insurances and the self employed theme.
What I mean by that and there are far more knowlegable folks than me on here on this subject…A friend of mine was NOVA for donkeys years and had the misfortune to have a bump whilst working for a client through the agency to cut a long lomg story short he is still going through court action and the agency have run for cover under the “He should have his own insurance gig”
Lonners:
Aranger setting yourself up is easy and several ways you can do it in a day.
To be honest due to my location and me telling the only company close to me to shove their job I struggle to pay the bills after deducting my fuel which can be about £80, so I would be limited to tramping which would cut my fuel expense.
Because umbrella’s are PAYE based they can only save you tax via manipulation of expenses. When your self-employed you do get your genuine expenses but also you get other tax structures and can use things like the Flat Rate VAT scheme to reduce your overall tax liability.
I’ve sent you a PM
A wee bump on this basically to tell anyone with an umbrella company or thinking of going to one to give Lonners a PM to discuss your situation.
I am now £30 a week better off even after deducting accountant fees and expect this to rise once an accountant does his magic and interest is earned on the N.I.C. and VAT that I put away.
I had to sign a couple of forms and keep my own records but its no worse than sending expenses to Nova.
surely that’s the important thing, least it is for me 
