On paper there are advantages to setting up your contracting business under an umbrella structure.
The umbrella structure enables Contractors to become a Director of a limited company without any of the set up costs involved with setting up their own personal limited company.
The umbrella company is set up and run by a third party (often a firm of Accountants) and they will usually look after all of the administration of the company i.e. invoicing, VAT returns, tax, administration, bookkeeping etc.
The major factor to consider when deciding whether to go with an umbrella structure is Revenue. They have been dedicating a lot of resources to reviewing these types of structures and many contractors have been the subject of Revenue Audits recently. Revenue have taken the view that in certain cases the contractors are not self employed but are in fact employees of the company requesting their services and this has resulted in significant settlements being made to Revenue.
The project that Revenue has undertaken to target these structures shows no sign of abating. A self employed contractor has far more control when setting up their own personal limited company and, once detailed professional advice is taken prior to setting up your own limited company, you can ensure that it is compliant with the strict Revenue rules surrounding self-employed contractors.
Disclaimer: Advice shared in this blog is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this forum, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.