85% Umbrella Companies Substitutes / Alternatives
Freelancers are, more and more, going down the Umbrella Companies substitutes route using umbrella companies alternatives or equivalents.
These can be offshore umbrella companies or they can make use of tax planning where the contractor uses his, or her, limited company.
Previously contractors went down the onshore umbrella company or limited company routes.
85% Returns for IT Contractors
They would get returns of maybe 60% to 65% using normal onshore umbrella companies or maybe 70% to 75% using limited companies.
Now, however, there are umbrella companies alternatives which return contractors 85% or more of their money.
They use tax incentives and the Government’s own legislation to do this.
There are three main ways of doing this:-
Offshore Umbrella Companies
In 1979, one of the first things that the Thatcher Government did was to legislate so that money could go offshore untaxed.
They would only taxed it if it came back onshore.
However, offshore umbrella companies providers make sure that this money never comes back onshore.
This money stays offshore and contractors get loans in lieu of it.
Loans are not taxable.
You don’t have to pay loans back after death. So, the contractor never pays back the loans and on his, or her, death. You write off the loans.
So, they never pay any tax on money received as the money they get is a loan.
It’s a very neat idea using three things:-
1. Money going offshore is not taxable
- Loans are not taxable
3. You write Loans off at death.
It’s basically using the Government’s own laws to save contractors money.
Of course, the Government could change its legislation to make loans taxable.
However, that would screw up the whole of the British banking sector. In fact it would destroy it – and the banking sector is one of the UK’s main assets.
Using Tax Planning – Umbrella Companies Substitutes
The second way for contractors to use an umbrella companies aternative is to use their own limited company but use efficient tax planning to maximise the money they are able to keep.
There are a number of companies who have different methods of doing this.
Examples of Umbrella Company Alternatives Using Limited Companies
You should click on these to find out more information or to apply. All return 85% or more to contractors.
Alternatives to Umbrella Companies
The Government set up IR35 so that contractors would either have to go down the IR35 tax route or be in an umbrella company where the tax savings are very limited.
Now contractors are able to take advantage of legislation brought in by the Government themselves.
They are basically taking advantage of tax incentives set up by the Government.