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breaktwister
9th February 2017, 18:02
So according the the IPSE document if the client makes an inside determination then "the contractor business will be taxed at source via PAYE and RTI".

How exactly are they going to tax a business as if it was an employee from a practical perspective? Can you put a business name into the PAYE system?

northernladuk
9th February 2017, 18:08
Wouldn't you just go brolly or on PAYE with the agent. No need for the limited if you are inside?

malvolio
9th February 2017, 18:10
Whoever pays the bill to the contractor's company will deduct the NICs and PAYE amounts and send them on to HMRC. If you're direct that's the client. If you are through an agency it will be them. If you're with a consultancy and you fail the test - as many will - then it's the consultancy.

There are many stupidities to this whole idea, so treating a Limited Company as an individual is well within the boundary.

SueEllen
9th February 2017, 18:23
Whoever pays the bill to the contractor's company will deduct the NICs and PAYE amounts and send them on to HMRC. If you're direct that's the client. If you are through an agency it will be them. If you're with a consultancy and you fail the test - as many will - then it's the consultancy.

There are many stupidities to this whole idea, so treating a Limited Company as an individual is well within the boundary.

To be fair in the US companies can be considered the equivalent to a person, so that's probably where HMRC got their stupidity from.

breaktwister
9th February 2017, 18:33
Do you not need a National Insurance number to pay NIC? How can a business pay NIC and Personal Income tax via PAYE as it it were an individual? The whole thing is bonkers. Also, contract law in the UK has been build up over hundreds of years and these rules fly in the face of a lot of it. This should be an easy win in court for a good lawyer. HMRC simply don't have the powers to regulate how businesses interact with each other in this way.

malvolio
9th February 2017, 18:42
Do you not need a National Insurance number to pay NIC? How can a business pay NIC and Personal Income tax via PAYE as it it were an individual? The whole thing is bonkers. Also, contract law in the UK has been build up over hundreds of years and these rules fly in the face of a lot of it. This should be an easy win in court for a good lawyer. HMRC simply don't have the powers to regulate how businesses interact with each other in this way.
You're preaching to the converted. Most of that has been said several times, including to HMRC and No10. Wishing it goes away isn't going to work...

eek
9th February 2017, 18:43
None of this is new.

The new rules are simply a variation of the construction industry scheme introduced in august 1999 and modified in April 2015

And that means hmrc can treat you as if you were an employee and can ask third parties to withhold the tax parts of you payment and pay them to hmrc on your behalf.

And there is no way to challenge this, the cis rules were challenged for years and hmrc win. There is no way to attack what is simply an extension to them.

breaktwister
9th February 2017, 19:03
Thanks for the infos guys. This is the death of personal service companies then.

The fallout is going to be huge, great timing as well in the middle of Brexit. This will cost the gov more than they take in in new taxes.

malvolio
9th February 2017, 19:10
Thanks for the infos guys. This is the death of personal service companies then.

The fallout is going to be huge, great timing as well in the middle of Brexit. This will cost the gov more than they take in in new taxes.
Gosh. Hadn't thought of that...

:igmc:

northernladuk
9th February 2017, 19:23
Thanks for the infos guys. This is the death of personal service companies then.

The fallout is going to be huge, great timing as well in the middle of Brexit. This will cost the gov more than they take in in new taxes.

Christ man. Take tin foil hat off and give up with the woe is me line.

I'd go permie if I were you. Sounds like it's a bit too tough for you out here.

breaktwister
9th February 2017, 19:28
So cool to post nothing of value, well done friend. No wonder your post count is so high if you pipe up just to try and insult folks who don't have things as worked out as you.

Semtex
9th February 2017, 20:01
So cool to post nothing of value, well done friend. No wonder your post count is so high if you pipe up just to try and insult folks who don't have things as worked out as you.

if you read his posts most are of no substance at all, just digs at people. I ignore his posts completely

northernladuk
9th February 2017, 21:01
So cool to post nothing of value, well done friend. No wonder your post count is so high if you pipe up just to try and insult folks who don't have things as worked out as you.

And your posts are helping how?

northernladuk
9th February 2017, 21:02
if you read his posts most are of no substance at all, just digs at people. I ignore his posts completely

That would be funny if it wasn't so tragic.

b r
9th February 2017, 21:14
Just a thought, but how will a contractor know that the monies (tax and NI) deducted are actually going to HMRC - and been recorded correctly?

And yes, I'm aware of RTI but how would you definitely know without waiting on the end-of-year P60 - oh, presumably it is a P60, or something else?

Something else, will the contractor get an actual payslip?

cojak
9th February 2017, 22:36
Just a thought, but how will a contractor know that the monies (tax and NI) deducted are actually going to HMRC - and been recorded correctly?

And yes, I'm aware of RTI but how would you definitely know without waiting on the end-of-year P60 - oh, presumably it is a P60, or something else?

Something else, will the contractor get an actual payslip?
All very good questions to which the answer is....

...nobody has a clue. You'd think that the agencies would be able to tell their contractors this, wouldn't you?

The only way to be sure of the above would be to join a legitimate umbrella- they've always worked like that.

b r
10th February 2017, 09:21
But what if the contract is directly with the public sector organisation (then their payroll would be processing it)?

HugeWhale
10th February 2017, 10:47
Do you not need a National Insurance number to pay NIC? How can a business pay NIC and Personal Income tax via PAYE as it it were an individual? The whole thing is bonkers. Also, contract law in the UK has been build up over hundreds of years and these rules fly in the face of a lot of it. This should be an easy win in court for a good lawyer. HMRC simply don't have the powers to regulate how businesses interact with each other in this way.


Yes they do. HMRC are part of the government. The government controls parliament. Legally there is nothing that parliament can not do.
If they lose a legal challenge they can change the law and make it retrospective if they like. You can't beat these guys, but if you're fleet of foot you can stay a step ahead of them.

malvolio
10th February 2017, 11:12
But what if the contract is directly with the public sector organisation (then their payroll would be processing it)?
I'm sure I answered that somewhere very recently. Basically the tax is passed on to HMRC by whoever is paying the worker. If you're direct, then it will be the client. How they do it is their problem.

5000
10th February 2017, 12:25
Just a thought, but how will a contractor know that the monies (tax and NI) deducted are actually going to HMRC - and been recorded correctly?

And yes, I'm aware of RTI but how would you definitely know without waiting on the end-of-year P60 - oh, presumably it is a P60, or something else?

Something else, will the contractor get an actual payslip?

In theory you could take control of "fee payer" responsibilities under the regs. Write to the fee payer to be saying the "worker" has left the company and has joined a new company has been subcontracted and services will continue as normal. Assumes an unfettered right to substitute/subcontract and will require a bit more paperwork :laugh

Tonyharding
15th February 2017, 08:39
I'm totally lost atm to be honest, so if the client taxes us at source, how do we claim for a company pension, expenses, life insurance, accountancy bills etc which is currently paid via our ltd company? Will this all now come out of our personal monies ?

To me it sounds like that if you are going to be within IR35 I shall now not be entitled to a company pension etc.

breaktwister
15th February 2017, 13:30
Will this all now come out of our personal monies ?



The short answer is unfortunately Yes. The income that previously would have went directly into your PSC, from which you would have deducted legitimate business expenses before paying corporation tax, is now taxed at source before your PSC receives it. If the contract falls inside IR35 then essentially you can no longer deduct business expenses as HMRC claim you are not in business on your own account, you are a "deemed employee" of the end-client.

On one hand the law has been concocted to "imagine a scenario where the PSC does not exist" s61M Finance Bill 2017. But once that imagined scenario has been dealt with and HMRC conclude under said imagined scenario "you are really an employee, we are going to tax you at source and not allow any business expense deductions" suddenly the PSC company pops back into legal existence as per their various guidance? It is a sleight of hand that is pushing the boundaries of logic and law.

Trying to operate a PSC if a contract is inside IR35 is pointless.

Pensions are an altogether more complex topic as they are not a "business expense" in the same way as other outlays.

breaktwister
15th February 2017, 14:15
[/B]
HMRC are part of the government. The government controls parliament. Legally there is nothing that parliament can not do.
If they lose a legal challenge they can change the law and make it retrospective if they like. You can't beat these guys, but if you're fleet of foot you can stay a step ahead of them.

You are correct in theory as Parliament claims to be "sovereign" but in reality they are bound by various international conventions and treaties, in particular current membership of the EU and associated directions from Brussels, ECHR etc. At any point in time there is a legal framework that Parliament must work within which is why certain laws and the application of those laws, even by government agencies, can be challenged if inconsistent with other laws that are deemed by the Courts to take precedence.

But yes, in theory Parliament can withdrawn from everything and re-write laws as they please, easier said than done though.

cojak
15th February 2017, 17:36
I'm totally lost atm to be honest, so if the client taxes us at source, how do we claim for a company pension, expenses, life insurance, accountancy bills etc which is currently paid via our ltd company? Will this all now come out of our personal monies ?

To me it sounds like that if you are going to be within IR35 I shall now not be entitled to a company pension etc.

Regarding pensions, an answer to that is here: http://forums.contractoruk.com/umbrella-companies/119109-there-umbrella-company-where-you-can-choose-your-pension-other-benefits.html