IR35 - Inside/Outside/Service Company/How much/why?

[ShandyDrinker]

Yes you can. You pay the tax. Client pays you on full. You get corp subs which covers expenses but going through ltd is best if you have mixed engagement in and out of scope.

Can IR35 contractors still work through a limited company? | Crunch

Just as I thought so thanks for the confirmation. Although I haven't studied it in detail, I'm assuming this will still be the same post April 2020.

[pauljh]

Yes you can. You pay the tax. Client pays you on full. You get corp subs which covers expenses but going through ltd is best if you have mixed engagement in and out of scope.

Can IR35 contractors still work through a limited company? | Crunch

Appears the 5% expenses goes come April 2020.

I'm now confused over my 33K Employee. Suppose I have £0k in my LTD (so need my contract to pay him), get a contract inside IR35 and they pay me say £500 a day (take home after PAYE, NI, etc). Do I then need to lend my LTD "x" amount per day so my Ltd can afford to pay my Employee?

Surely IBM (as an example) are going to get caught by this? I've many many many times come across IBM employees who've been place on site for 7+ years, IBM charge client £1000 a day, Bod in seat takes home £300 a day, pointless middle men get £700 a day.... Does IR35 apply to the £1000 a day IBM get or the £300 a day "Bod" gets (which ofcourse he already pays PAYE, etc on)?

If IBM are outside IR35 in that case (preferred supplier, bidding etc is all a game and not real (in a lot of instances IMHO!)) how are IBM any different to me except they have more employees and a bad reputation??

I've read lots about IR35, some mention look at your expenses, pension etc so the "irrelevant" etc comments previously contradict other things I've heard.

I seam to be getting contradicting quotes all around, why wouldn't every client deem all contractors inside IR35 just so they don't get to pick up a tab later in time (yes I've heard its illegal etc, but that would be tricky to prove and certainly wouldn't do your career any good!))

All IR35 calculators for me say "Unsure, call us to discusss".

[WordIsBond]

For the engagement where both you and your permie work, do you have separate contracts, or a single contract that includes both of you? Do you give them a single invoice to cover both, or separate invoices?

If it is all one contract and all one invoice, I think it would be very difficult to argue you are a hidden employee. Employees don't hire someone in to do a job, as you are doing.

Who supervises your employee, you, or the client?

[northernladuk]

Agree with most of the above apart from the highlighted part. I'm pretty sure you can still work via your LTD although I am unsure of precisely how it would work.

True in theory but doesn't work in practice. None of the agents will allow LTD's as an option. It opens them to unneccesary risk. There are no good reasons to go via your LTD and plenty of reasons not to.

Here is a paragraph from The FaQQers FAQ and it's been covered in many posts since.

Continue working via your limited company

In theory, this is possible, but I just don't see it lasting as a way of working in the public sector for much longer because of the headache that it gives to the fee payer. The client or agency would be responsible for withholding the tax and NI from your invoice and then paying that over to HMRC - why would they want to take that headache on when an umbrella company can do it for them (and push the cost to you)? I can't see an upside for the fee payer, but there are downsides that I wouldn't want to face if I was in their position (I also question how many agencies or clients are able to take this burden on, let alone willing). Additionally, as mentioned above, your options about paying into your pension via salary sacrifice are removed so there is little or no benefit to the contractor in working via their limited company.

If you are lucky (unlucky?) enough to find an agency who is willing to take you on inside IR35, in the public sector, via your limited company (and I'm not sure why they would take the downsides and none of the upsides) then you would continue to invoice the agency as normal. The agency invoices the client as normal. The agency, using your personal tax situation, will then calculate the tax and National Insurance that needs to be paid as if you were an employee. Once they have made that calculation, the agency will pay the net sum to your limited company, and the company can now forward that amount on to you. If the calculation of PAYE is wrong, then you will need to correct that and either pay additional tax or claim overpaid tax back from HMRC via your self assessment. You will not be able to claim back any National Insurance if this is incorrectly deducted.

FWIW, my opinion would be to not work via a limited company, inside IR35, in the public sector because of the complexity of relying on the agency to get everything right. You will also need to make sure that your limited company accounts are correct because the amount received from the agency will not match the invoice value. You will also need to ensure that the agency treats the VAT element of your invoice correctly, and that this is also accounted for properly.

[northernladuk]

Appears the 5% expenses goes come April 2020.

I'm now confused over my 33K Employee. Suppose I have £0k in my LTD (so need my contract to pay him), get a contract inside IR35 and they pay me say £500 a day (take home after PAYE, NI, etc). Do I then need to lend my LTD "x" amount per day so my Ltd can afford to pay my Employee?

Surely IBM (as an example) are going to get caught by this? I've many many many times come across IBM employees who've been place on site for 7+ years, IBM charge client £1000 a day, Bod in seat takes home £300 a day, pointless middle men get £700 a day.... Does IR35 apply to the £1000 a day IBM get or the £300 a day "Bod" gets (which ofcourse he already pays PAYE, etc on)?

If IBM are outside IR35 in that case (preferred supplier, bidding etc is all a game and not real (in a lot of instances IMHO!)) how are IBM any different to me except they have more employees and a bad reputation??

I've read lots about IR35, some mention look at your expenses, pension etc so the "irrelevant" etc comments previously contradict other things I've heard.

I seam to be getting contradicting quotes all around, why wouldn't every client deem all contractors inside IR35 just so they don't get to pick up a tab later in time (yes I've heard its illegal etc, but that would be tricky to prove and certainly wouldn't do your career any good!))

All IR35 calculators for me say "Unsure, call us to discusss".

Again, you've completely misunderstood IR35. It's not on the company, it's on you and your taxes. In your example substitute IBM for Your LTD and also IBM employee for you. No correlation whatsoever so the whole post is invalid.

You've also missed the comments I've made about the type of contract. IBM will have a big overarching supplier contract. You have one to supply personal services. Couldn't be more different.

Yes IR35 has an impact on your expenses and pension but they have nothing to do with the determination of your status so irrelevant.

I'd do some more reading. Start with the guides on your right.

[pauljh]

Again, you've completely misunderstood IR35. It's not on the company, it's on you and your taxes. In your example substitute IBM for Your LTD and also IBM employee for you. No correlation whatsoever so the whole post is invalid.

You've also missed the comments I've made about the type of contract. IBM will have a big overarching supplier contract. You have one to supply personal services. Couldn't be more different.

Yes IR35 has an impact on your expenses and pension but they have nothing to do with the determination of your status so irrelevant.

I'd do some more reading. Start with the guides on your right.

I agree my view of IR35 keeps changing and I've read a lot and just re-read again. So my "conclusion" is

My 33K person I can send anywhere at any rate and "he" and that contract will never be inside IR35.

Where as a contract I take (which states me by name or implies its just me) I "may" be inside IR35 (subject to substitution clause (and how real they are), MOO, termination period, history with client).

So I don't need to worry about my 33K'er and only need to worry about my conduct with clients??

[northernladuk]

I agree my view of IR35 keeps changing and I've read a lot and just re-read again. So my "conclusion" is

My 33K person I can send anywhere at any rate and "he" and that contract will never be inside IR35.

Where as a contract I take (which states me by name or implies its just me) I "may" be inside IR35 (subject to substitution clause (and how real they are), MOO, termination period, history with client).

So I don't need to worry about my 33K'er and only need to worry about my conduct with clients??

Surely that 33k is providing a personal service and is therefore bound by the same rules as you? It's on the role, not the way he's remunerated by you surely?

[cojak]

True in theory but doesn't work in practice. None of the agents will allow LTD's as an option. It opens them to unneccesary risk. There are no good reasons to go via your LTD and plenty of reasons not to.

Here is a paragraph from The FaQQers FAQ and it's been covered in many posts since.

I'm hoping the FAQqer will see his way to creating the same thread for April 2020. I'll make it a sticky if he does.

[northernladuk]

I'm hoping the FAQqer will see his way to creating the same thread for April 2020. I'll make it a sticky if he does.

I seriously hope so. Looking at the couple of threads started this week we are seriously going to need it!!

[pauljh]

Surely that 33k is providing a personal service and is therefore bound by the same rules as you? It's on the role, not the way he's remunerated by you surely?

Ok lets assume worst case I have "bod" who I pay 10k a year and charge him out at £1000 a day (inside IR35) so the client pays PAYE/NI on £1000 a day (in his name as he's providing a personal service albeit via my Ltd). Won't his Tax account look very odd?, he'll have paid a lot more tax than what he actually took home? I'm exaggerating the figures here..