Being Sure of Your Status: Checking IR35 With an Umbrella Calculator
There are a considerable amount of up sides to using an umbrella company
An umbrella calculator is a website tool or piece of software, commonly offered by umbrella companies for “hire”, which allow the user to enter their own fiduciary criteria and a range of other factors, such as their hourly income , number of hours worked and usual costs like overnight accommodation and subsistence when away on business. Other variables you might put into an umbrella calculator will include business mileage and any other genuine business expenses. The primary use of an umbrella calculator is to use these variables to calculate whether a person will be financially better off working for an umbrella company or under contract as a self employed person. The Umbrella calculatorchecks all of the variables against the tax system and calculates a possible saving should the applicant choose the umbrella company option.
Over and above using an umbrella calculator, you should ensure you have a comprehensive grasp of and are totally compliant with IR35. IR35 is the name of a piece of UK legislation issued to ensure that people set up to be hired by an umbrella company do not benefit unfairly from their change in situation. IR35 was issued in 1999, prior to which time people employed by an umbrella company could without fear of punitive action take their income as company profits, which were exempt from National Insurance payments. IR35 also acted to counter an umbrella company from being shared by different members of the same family, such that all of the owners could benefit from distributing the company’s income across each owner’s lower income tax band and personal allowances, so as to reduce their tax bill to the point of avoidance. Although it has been subject to regular consideration and review by various governments, IR35 is still intact and also remains largely unchanged since its issue.