- Original Poster
- #1
Hello, I got a new job, I'm going to be paid as a contractor IR35 through an umbrella company. One company is saying I don't need to pay any tax outside of the 20% as the rest is through capital gains which they are saying isn't taxed. But from my research capital gains are a one off not occurring payment.
I'm on £600 per day and effectively pay only £200 a week in tax, the rest is paid through capital gains, they are charging a 18% fee, seems very suspicious.
I've been advised by another Umbrella company not to do this as its illegal.
I'll show you what they sent me.....
Based on our discussion and given that you are commercially minded, we would suggest the consultancy option as the best and most appropriate for you. The consultancy option gives you the flexibility and scope to benefit fully from being a genuine commercial enterprise, something not afforded to the majority of contractors. Please read the attachment provided for further details.
The Consultancy will arrange for you to become an employee of one of our engaged Umbrella Companies. As an employee, IR35 just isn't applicable so this is something you needn't worry about.
The Umbrella Company will pay you a salary which equates to £433.00 per week (£86.60 per day) if you were to work 5 days, and would pay all Tax and NIC's due on your behalf, leaving you with £340.12 after deductions (assuming a 1257L tax code). In addition to this you will become a member of the Consultancy Network and can become eligible to receive Profit Share.
There are several ways you can choose to receive profit share, all of which are eligible to be disclosed to HMRC and are in most cases taxable, these are;
• As additional salaried income,
• As a Dividend,
• As a Capital Payment,
Below are example take home figures (NET) based on an invoice of £3,000.00, a salary of £433.00 and assuming additional generated profit advance of £2,104.94.
I'm on £600 per day and effectively pay only £200 a week in tax, the rest is paid through capital gains, they are charging a 18% fee, seems very suspicious.
I've been advised by another Umbrella company not to do this as its illegal.
I'll show you what they sent me.....
Based on our discussion and given that you are commercially minded, we would suggest the consultancy option as the best and most appropriate for you. The consultancy option gives you the flexibility and scope to benefit fully from being a genuine commercial enterprise, something not afforded to the majority of contractors. Please read the attachment provided for further details.
The Consultancy will arrange for you to become an employee of one of our engaged Umbrella Companies. As an employee, IR35 just isn't applicable so this is something you needn't worry about.
The Umbrella Company will pay you a salary which equates to £433.00 per week (£86.60 per day) if you were to work 5 days, and would pay all Tax and NIC's due on your behalf, leaving you with £340.12 after deductions (assuming a 1257L tax code). In addition to this you will become a member of the Consultancy Network and can become eligible to receive Profit Share.
There are several ways you can choose to receive profit share, all of which are eligible to be disclosed to HMRC and are in most cases taxable, these are;
• As additional salaried income,
• As a Dividend,
• As a Capital Payment,
Below are example take home figures (NET) based on an invoice of £3,000.00, a salary of £433.00 and assuming additional generated profit advance of £2,104.94.
| Distribution* | Weekly** | Monthly** | % |
| Additional Income | £1,393.03 | £5,572.12 | 46.43% |
| Salary and Dividend*** | £1,646.27 | £6,585.07 | 54.88% |
| Salary and Capital Payment*** | £2,260.17 | £9,040.68 | 75.34% |
