Tax umbrella company

[happyolly]

First of all hello everyone

Oooook...I'm looking at a contract in Finland through a UK agency and they are stipulating I use a tax management / umbrella company.
I've searched here and on the net but I can't find any such organisations mentioned.
I'm just trying to get an idea of what I'd be left with after deductions to see if it's worth going to the interview.

Please could you point me in the direction of such a company.
Thanks

[Rosamunda]

What do you mean by "tax umbrella company"?

In Finland you can be self-employed (toiminimi), in a partnership (Ky and Ay), an association (ry), set up a limited company (Oy) or a public listed company (Oyj) - I think that's about it.

Are you an EU national?

Try looking on this place : http://www.prh.fi (which is where all companies have to be registered)

Deductions depend on whether you are a shareholder or an employee of the company and on how much you earn. And a few other things.

[happyolly]

Well in the UK a freelancer can work through an umbrella company.
You can deduct expenses from what you invoice and pay income tax and both employers and employees National Insurance on the rest.
You are basically and employee of the umbrella (but pay their NI too)
It sounds like the agency are insisting the Finish equivalent be used.


Just in case you're interested. Contractors who bill a reasonable amount usually use Ltds in the UK. They pay themselves a low salary that is not taxed and take dividends taxed at 21% up to the personal income 40% band. Of course all expenses can be reclaimed and flat rate VAT adds another 1% or so to the mix.

It strikes me that a contract in Finland isn't going to be competitive unless it's maybe paying 50% more than the UK equivlent role.

[Pursuivant]

It sounds like the agency are insisting the Finish equivalent be used.

Then you ask the beacons of intelligence what the "equivalent" is. "This ain't Kensington, Dorothy"

[rinso]

They pay themselves a low salary that is not taxed and take dividends taxed at 21% up to the personal income 40% band.

This sounds to me as a tax evasion scheme.
Those things are not received well with the tax office.

[Upphew]

They pay themselves a low salary that is not taxed and take dividends taxed at 21% up to the personal income 40% band.

This sounds to me as a tax evasion scheme.
Those things are not received well with the tax office.

Also available in Finland: up to 90 000€ (but under 9%) from equity is tax free. If you pay dividends above that, they are taxed 70% as capital gains and 30% is tax free. If there is not enough equity to stay under 9%, but you pay dividends over 90 000 they are taxed as 70% wages and 30% tax free. So your oy should show something around 1 000 000€ floating around to pay full dividends tax free.

So if you are considering going the oy route to evade taxes, then you have enough money to hire proper people to clarify things so you don't have to trust some Upphew at some Finland Forum...

[Rosamunda]

Well in the UK a freelancer can work through an umbrella company.
You can deduct expenses from what you invoice and pay income tax and both employers and employees National Insurance on the rest.
You are basically and employee of the umbrella (but pay their NI too)

In Finland most freelancers have a "toiminimi" (ie are registered as sole traders). This enables you to deduct your business expenses from your income and the net result is taxed as regular income tax. NI would be deducted in the normal way (it's YEL or TEL, I don't remember which). You would probably also have to register for VAT (Alv) if your annual income is over 8500e

In order to register as a toiminimi you have to be an EU national. But I don't think you have to be resident in Finland (as long as you are resident in an EU country).

There is more about this on Entreprise Finland (linked from the www.prh.fi pages)


In Finland, like the UK, many freelancers also have limited companies eg doctors who work in the private sector. This is to avoid tax but it is not evasion since they are not breaking any laws. However, I believe that Vero (the tax office) intends to fix this loophole.

[happyolly]

They pay themselves a low salary that is not taxed and take dividends taxed at 21% up to the personal income 40% band.

This sounds to me as a tax evasion scheme.
Those things are not received well with the tax office.

Not at all, it's the tax efficient way to run a Ltd in the UK. It's hardly a "scheme" as such. It's the way many / most Directors of Ltds receive income.
The tax office are fine about it, but they don't like people working as disguised employees, in those cases they want you to pay yourself PAYE. It's a ruling called IR35 that is due to be reviewed if there's a new Government as it's grey and unfair.

Hmm....so no one can point me in the direction of an "umbrella company" then ?

Thanks for all the other advice though, I'll look at Ltd/Sole trader but as a sole trader, if there's no benefit like the UK dividend route I described above, then it's hardly worth it and you're best running with an umbrella in the UK. It's hard to imagine the same is not true in Finland.

As a sole trader is essentially the ONLY financial in-your-pocket difference from being an employee the deductions that can be made for expenses?
Anyone know of an online TAX calculator please?

[Upphew]

Anyone know of an online TAX calculator please?

The taxman has one: http://tax.fi/

[Rosamunda]

As a sole trader is essentially the ONLY financial in-your-pocket difference from being an employee the deductions that can be made for expenses?

Yes. But, in theory, you have to have more than one customer in order to benefit from that (same if you set up an Oy) otherwise every man and his dog would have a limited company.

What kind of difference are you looking for. I don't see what the big advantage is in the UK using an umbrella company, maybe I missed something. Can you explain in more detail what the advantage of an umbrella company is in the UK? Are you a shareholder or an employee of the umbrella company? How do you deal with VAT? Why can't the UK umbrella company send you on an assignment to Finland?

[happyolly]

In the UK some people enter into a contract with the umbrella company and effectively becoming PAYE employees, with the company then contracting with their customers and taking responsibility for invoicing, paperwork, collection of money due and payments to each contractor, less tax and National Insurance deductions in addition you can deduct expenses, though not as many as via a Ltd.
There are no real tax benefits and of course it doesn't matter if you only have one end client contract.

There is no advantage to using an umbrella in the UK, it's just simple and can be cost efficient for people on low rates.

A UK Umbrella presumably could send me to the UK, so could my UK Ltd of course but the agency / end client insist on a Finish based solution...a PAYE equivalent but I hope one that allows me to deduct what will be pretty extensive expenses.

"for this rolwe you CANNOT worjk via your uk ltd, you must
work via a compliant tax-social security finish based solution which
is smooth-efficient-easy and legal com;iant for us all"

There's loads about how UK umbrellas work on the net but I guess it's not really of interest.

[Rosamunda]

Are you an IT consultant?

If so, you could try contacting http://www.staffpoint.fi or http://www.ework.fi or a brokering firm like that. I don't know if they offer that kind of a service but they might. There are plenty of them (they supply contractors to firms like Nokia and Tieto) but I don't remember their names.

[Tiwaz]

Before signing anything though... Ask yourself...

What is the company making from your business? They are not doing anything out of goodness of their hearts, they want profit. And someone has to lose money for them to make it.

[jbr]

Hi there,

did this ever get solved? Happyolly, could you tell how you did it in the end?

For what it's worth, here's the why of umbrella companies in the UK, in a nutshell:

* job agencies in the UK do not want to pay your taxes for you, they just want to receive an invoice every week, add their cut and get money for the final employer. As a result, they insist on trading with limited companies that can take care of their own taxes;
* establishing your own limited company is a pain in the butt: you need initial investment, business premises (I think) and to do your own tax calculations or use an accountant, etc.

Umbrella companies solve this problem by acting as a middleman between the agency and the contractor: they're limited or public companies that pay their own taxes, so they make the agency happy: they're OK with subcontracting your own job to you as a sole trader and to sort out the tax issue.

These companies save you a lot of grief for about 10 or 20 pounds per week: every friday you tell them how many hours you've worked this week, they do the administrative thing and the week after that you get your money, and that's that.

[CheesyWotsit]

Not sure how you got on with this as it's been a while since you first posted, but agencies will only deal with umbrella company workers or limited companies (not sole traders - tax law) so those are your two options. Bear in mind the Agency Workers Directive is changing how some Umbrella companies operate from October however.

Here is a list of umbrella companies http://www.contractoruk.com/directory/u ... anies.html to help you.