This is an interview with Peter Warren, Director of OrangeGenie an umbrella company for contractors. In this very frank and enlightening interview he explains the reasons for setting up his new company, the unique services and benefits it offers and his passion for providing his clients with a quality of service second to none. He also discusses the reasons why someone would want to consider changing from a limited company solution to an umbrella. His style is refreshingly straight to the point and certainly provides food for thought. Read on…..
Q) Why should contractors consider an umbrella company, rather than starting their own Ltd company?
A) Simple: because hourly/daily rates are dropping. And as they do it’s a straightforward calculation that says one pay vehicle is better than another. At the moment the balance is swinging in favour of the umbrella, ask me in a couple of years time and you might (fingers crossed) get a different answer. Ltd Companies are still better for some, it just depends on an individuals own circumstances.
Q) How easy or difficult is it to convert to an umbrella solution?
A) We’ll do it for you in half an hour.
Q) How does it save contractor money?
A) It may, or it may not. But consider this:
Fact 1: one decent umbrella company will offer you the same return as another.
Fact 2: there are no magic systems or devices to get around our tax laws – and if someone’s telling you otherwise start hearing alarm bells.
Fact 3: the harsh reality of life is that you HAVE to pay tax.
Fact 4: even with IR35 to contend with some will be better off with a Ltd Co, others using an umbrella. We just reduce the pain to a minimum and make it a little easier to bear.
Q) So around what sort of rate should a contractor consider changing from a limited company to an umbrella solution?
A) Regardless of rate, if you’ve been trading via a limited company for more than six months you should get an ‘accounting’ check-up, and sooner rather than later. Changes are happening all the time with the tax laws and unless you’re aware of all the intricate niceties you could be losing out. Give us a call and we’ll tell you straight whether you’d be better off switching payroll methods – it could be that your limited company is already giving you the best returns.
But rates are really only part of the equation. Anyone who finds it a chore spending time each month on administration (mention either VAT or the IR and most will start running) should really think about an umbrella solution: with this vehicle, essentially all you have to do is submit your timesheets and the rest is done for you. You’ve got to be honest with yourself and consider just how many spare hours do you have for bureaucracy – maybe your time’s better spent doing other things? Most people are right when they think, “Accountants are those weird types who enjoy endless columns of figures and filling in forms”. Let us get on with making sure you’re taking home the maximum amount of money possible, and you get on with your life.
Q) How much could I save if I was caught by IR35 and decided to move to an umbrella solution?
A) Undoubtedly, there are an enormous amount of contractors who could benefit by switching from Ltd Co to umbrella, because of IR35’s wide net, but not everybody. An impossible question really. Boring but true, each individual will have their own set of circumstances and judgements need to be made based on those. Blanket promises are born of fanciful ignorance, not reality. Don’t get fooled by sensational headlines. You’d be better off stopping chasing the rainbow. “Are you happy with the level of service you’re getting from your payroll provider/accountant.” – a much better and more relevant question in today’s climate.
Q) What were the reasons for starting Orange Genie and what are its’ unique selling points?
A) My colleague and I started the company because we were fed up with the general level of service being provided to freelance workers. We believe that if you pay for something you should get it – no ifs, buts or excuses. There are too many companies who just take people’s money and don’t really care about their customers after that. It’s about time this industry woke up to the fact that customers are king. It made us angry and we decided to do something about it. We’ve been rewarded by a huge response, from like-minded souls eager for the best advice matched with similar levels of attention.
Q) What do you think of the accounting industry and how they treat contractors in general?
A) On the whole we’re a good honest and hard working bunch of people. But what really bugs me is how some of my peers try and over complicate what we do. Our industry isn’t rocket science (and I know I won’t be making any friends by saying this) and we should all just be concentrating on providing a simple straightforward service dedicated to making life easy for our customers. Unfortunately, there’s too much time dedicated to ludicrous ‘get rich quick’ schemes, some of which are quite honestly are nothing but cheap marketing gimmicks that wastes everyone’s time and give us all a bad name. We’re paid to assess tax laws, that’s part of our job and we should treat IR35 in the same way as we treat all other legislation: how can our client benefit the most?
Q) Aren’t umbrella solutions simply another way of legally avoiding tax, which IR35 was decided to resolve?
A) Umbrella solutions are a vehicle to get paid, simple as that. If you can pay less tax and it’s legal – you’d be stupid not to do it. Either way the Chancellor will always get his pound of flesh, but don’t ever think the UK will be a tax utopian because it won’t. A half decent accountant can tell you in five minutes which method is best for you and how to reduce your tax burden – that’s not the hard bit. What separates the good from the rest is being able to deliver what you promise.
Q) Will the Inland Revenue catch up with umbrella services like they did with limited companies and IR35?
A) There’s not a great deal more the IR can take from the contractor. IR35 plugged a ‘hole’ in our tax laws and ended a rather good party. There would have to be wholesale changes aimed at the entire workforce for umbrellas to be effected – and I don’t believe the Government has intentions to introduce any further measures, at least in the short term.
On a wider note, if you mean will the unscrupulous get their comeuppance, then you have to believe the IR will always catch up with ‘cowboy’ companies. Decent well-run organisations have nothing to fear. It’s like any industry; you get good guys and bad guys. Just don’t be fooled by wild promises. Would you believe an advert that says: “This car does 150mph, 80mpg and it’s yours for £3,000!!!!” The bottom line is that freelance workers now face comparatively stringent taxation. Acting on behalf of our clients we reduce that burden to its lowest legal level – which is all we can do.
Q) What does your company offer that other umbrella services do not?
A) Sincerity, honesty and a real passion to show the world that it can be done professionally, courteously and painlessly for a fair price. We know the tax laws as well as everyone else, our secret ingredient is that we put the customer first. There’s no magic involved we just appreciate and are offering what all other service industries have been doing for 15 years now. Remember when banks used to close by mid-afternoon? Well, when everyone else is counting their money behind locked doors we’re still at the tills servicing our clients.
Q) What are the key factors I should be considering if I am trying to decide if an umbrella solution is good for me?
A) Speak to an accountant (not a sales person) for some advice. Not only about your earnings and work pattern but also your lifestyle and how much time you want to spend on administration. Are you prepared to spend a few hours each month crunching the numbers? Some people enjoy it, but if not you’re probably better off with a more straightforward answer – ie an Umbrella. I’ll say it once more “It’s not rocket science.” Trust, confidence and actually liking the person you deal with are far more important – spend your time concentrating on these areas and you’ll reap the rewards far better than if you go for pure price. Whilst everyone has taken a hit, remember cost doesn’t equate to value.
Q) Going back to IR35, even if I’m not caught by IR35, will an umbrella solution save me more money than my limited company solution?
A) No, not necessarily. The IR35 legislation didn’t do our industry any favours, but for the foreseeable future we’ll have to live with it and find the best ways of reducing the implications. Dependent on your ongoing expenses, pension provisions and a few other issues you may well be better off trading through an umbrella. Either way your accountant needs to assess your own circumstances and give you considered advice as to which vehicle would suit you best.