Why move from an Umbrella to a limited company

Overview

Contractors working in UK have two options regarding the choice of payment structure, which includes Umbrella Company and limited company. If contractors are not satisfied with the services of an umbrella company it is possible for them to shift to limited company option.

Reasons to move

There are some potential reasons for which contractors leave their Umbrella company and opt for limited one. Described under are few of these reasons.

  • Contractors who started contracting with a view to work on short term contracts might excel in this field and require a set up to managed long term contracts.
  • It might serve as a more viable solution when contractor want to take the control of company in his/her hands. It would be beneficial for expansion of the business and manage it according to one’s own needs.
  • Sometimes contractors are unhappy with the payment structure or services offered by Umbrella Company, which results in shifting to limited company.

How to move

In order to move from Umbrella to a limited company the contractor should follow the procedure explained below.

  • The contractor must fulfill the responsibilities regarding the existing contract, which was awarded through a contract between agency and the Umbrella Company.
  • It is much difficult to transfer the existing contract to the limited company and requires the consent of umbrella and agency involved.
  • There is no specific procedure of closing down or dissolution of a company and you can simply switch from one umbrella provider to limited company.
  • The contractors must send notice to Umbrella Company prior to leaving it. During this period contractors should try to clear all there pending invoices and other tax related matters.
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