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NetContractor
28th September 2017, 07:55
I am currently in contract inside IR35 for a PSC client. I accepted the initial contract post the whole IR35 situation thinking it was going to be only a few months. They have now asked me to extend another 12 months.

(As an aside, is it possible to get an inside IR35 contract flipped to be outside? Obviously by adopting different working practices that are truly outside IR35) I already choose the hours I work and use some of my own equipment regularly.

The main question here is Pension contributions. I have a mortgage on a few properties, and up until now I have left my pension dormant in favor of paying down my mortgage; it is going well. However when I calculate my tax bill over the next 12 months, I think I would be better off leaving the mortgages and putting money on my pension instead, gaining tax relief in the process. My current situation is I continued to work through my Limited Company. My agency is covering the fees their accountant charges to operate PAYE, so there is no difference to me than before; they pay me with Tax and NI deducted, and I pay myself 100% salary. Expenses aren't an issue (before someone points that out) as I am 3 miles from home.

I have asked my agent, but they are not being quick about responding to me.

Can I instruct their accountant to pay directly into my stakeholder pension before deducting tax?

Thanks

northernladuk
28th September 2017, 08:46
Bearing in mind you are kind of employed by them why not ask them? Can't do any harm asking but I'd be very surprised if they would do anything above the absolute basics. I would have thought you'd have to pay in to a scheme though? Whatever the rules are I'd speak to them to see if they'd even entertain this first.

Did the agents offer you the option of an umbrella at all? If they did was it a Fixed list? I found the agents PAYE the most expensive option so went brolly. The upside is the brolly allows any level of payments in to their scheme. Happy days.

Surely expenses shouldn't be an issue at all seems they don't exist anymore?

As for flipping the gig. Highly dependant on the client and probably very difficult to do. I tried and got in to a bit of hot water about it. I think there is plenty of discussion in the PS fora. It's a very complicated area.

eek
28th September 2017, 08:56
Bearing in mind you are kind of employed by them why not ask them? Can't do any harm asking but I'd be very surprised if they would do anything above the absolute basics. I would have thought you'd have to pay in to a scheme though? Whatever the rules are I'd speak to them to see if they'd even entertain this first.

Did the agents offer you the option of an umbrella at all? If they did was it a Fixed list? I found the agents PAYE the most expensive option so went brolly. The upside is the brolly allows any level of payments in to their scheme. Happy days.

Surely expenses shouldn't be an issue at all seems they don't exist anymore?

As for flipping the gig. Highly dependant on the client and probably very difficult to do. I tried and got in to a bit of hot water about it. I think there is plenty of discussion in the PS fora. It's a very complicated area.

Some umbrellas will allow you to pay unlimited (well everything after minimum living wage) amounts into their pension scheme - others umbrellas as PC has amply demonstrated won't..

NetContractor
28th September 2017, 09:00
Bearing in mind you are kind of employed by them why not ask them? Can't do any harm asking but I'd be very surprised if they would do anything above the absolute basics. I would have thought you'd have to pay in to a scheme though? Whatever the rules are I'd speak to them to see if they'd even entertain this first.

Thanks. That's the question...Should I be able to instruct the agency accountant to redirect part of my payment (pre-tax) into my pension fund.


Did the agents offer you the option of an umbrella at all? If they did was it a Fixed list? I found the agents PAYE the most expensive option so went brolly. The upside is the brolly allows any level of payments in to their scheme. Happy days.

Of course they OFFERED their Brolly Scheme; I immediately declined though. I am very happy with my accountant; fully intend on seeking future contracts being outside IR35; and never thought they would ask to extend beyond 6 months that I originally agreed to, so (I thought) my IR35 time would be limited. I therefore kept my accountant. Besides I am VAT Registered, so still had those returns to complete. Plus the agency stated that they would go through a "scheme" via their accountant for which they would cover the costs.


Surely expenses shouldn't be an issue at all seems they don't exist anymore?

They do still exist, and will do once again, once I leave this contract. You know what it's like on here; someone will always jump at an irrelevant part of your question and drift off on a tangent.


As for flipping the gig. Highly dependant on the client and probably very difficult to do. I tried and got in to a bit of hot water about it. I think there is plenty of discussion in the PS fora. It's a very complicated area.

I appreciate this would be difficult; I'm just curious if it can be done. Client's project is very dependent on me (personally) as the technology I have employed is niche to my own skill set. Not really, but they have had issue employing competent people in the past, and given the current level of investment in this project they would not risk losing their primary development resource. :) (pats self on back)

NetContractor
28th September 2017, 09:04
Some umbrellas will allow you to pay unlimited (well everything after minimum living wage) amounts into their pension scheme - others umbrellas as PC has amply demonstrated won't..

Thanks. I'm not with an Umbrella.

My agency is using their accountant, to calculate the Tax/NI and they then pay me. I am still operating VAT and still using my own accountant. I have several pensions, one of which is a Stakeholder pension through my company, which I previously contributed to. However I am currently paying something in the region of £4,000 tax each month, and then paying £2,000 extra onto my mortgages each month. Allegedly I would be better off, paying £2,000 into my stakeholder pension, and gaining back nearly £2,000 in taxes.

eek
28th September 2017, 09:07
Thanks. I'm not with an Umbrella.

My agency is using their accountant, to calculate the Tax/NI and they then pay me. I am still operating VAT and still using my own accountant. I have several pensions, one of which is a Stakeholder pension through my company, which I previously contributed to. However I am currently paying something in the region of £4,000 tax each month, and then paying £2,000 extra onto my mortgages each month. Allegedly I would be better off, paying £2,000 into my stakeholder pension, and gaining back nearly £2,000 in taxes.

And that is the wrong option as you are paying employers and employees NI in a way that isn't recoverable.

You would be better using an umbrella for IR35 contracts and allowing them to manage your pension contributions correctly. You then use your limited company for outside IR35 contracts..

Keep things simple is my motto...

NetContractor
28th September 2017, 09:17
And that is the wrong option as you are paying employers and employees NI in a way that isn't recoverable.

You would be better using an umbrella for IR35 contracts and allowing them to manage your pension contributions correctly. You then use your limited company for outside IR35 contracts..

Keep things simple is my motto...

I don't know...Yes, the way I HAVE been doing it is wrong, however I thought this was going to be a short term solution. I am waiting for a response from the agency's accountant, to see if (how) I can arrange to get them to make contributions pre-tax into my stakeholder pension.

I did all the calculations, and apart from this complication, at my current rate, there is very little difference between brolly and umbrella. I'd have still needed my accountant as I am VAT registered anyway.

psychocandy
28th September 2017, 09:18
I looked into this extensively and in the end if wasnt worth it and easier to go umbrella.

Beware though - pick and umbrella that allows salary sacrifice pension contributions. It'll save you shedloads.

First umbrella I was with (Sterling) just did the minimum contribution of something crap like 1% - anything else had to be AVC. Bit of a waste because you still have to pay both NIs (even though you do save on tax).

Im with Danbro now and they allow salary sacrifice. So any pension contribs I make come before employer NI, employee NI, tax. Bascically, I worked out if I stick in £100 a week (I do more than this) then it amounts to only £45 less in my pocket. So bung loads in.

BTW - Danbro also do childcare vouchers as salary sacrifice.

In the process of closing my ltd down for now. Next contract if outside IR35 I'll start it back and then consider transferring my danbro pension over to my existing SIPP.

northernladuk
28th September 2017, 09:23
Thanks. That's the question...Should I be able to instruct the agency accountant to redirect part of my payment (pre-tax) into my pension fund.

Yes you pick the phone up and ask. Are they obliged to do so when you request this service? I'd say no. It's not part of the contract and your engagement with them so it's a nice to have but if were them I wouldn't. You could ask if they would in individual case and the fact you've a long engagement so they may be flexible.



Of course they OFFERED their Brolly Scheme; I immediately declined though. I am very happy with my accountant; fully intend on seeking future contracts being outside IR35; and never thought they would ask to extend beyond 6 months that I originally agreed to, so (I thought) my IR35 time would be limited. I therefore kept my accountant. Besides I am VAT Registered, so still had those returns to complete. Plus the agency stated that they would go through a "scheme" via their accountant for which they would cover the costs.


I'm confused. What does your accountant have to do with all this?

Could you have not picked a brolly of your choice that they would work with?



They do still exist, and will do once again, once I leave this contract. You know what it's like on here; someone will always jump at an irrelevant part of your question and drift off on a tangent.

What is it with people getting pissy when they mention something and some stranger who's giving free advice picks up on it and the OP doesn't want to hear. Why did you mention it in the first place?



I appreciate this would be difficult; I'm just curious if it can be done. Client's project is very dependent on me (personally) as the technology I have employed is niche to my own skill set. Not really, but they have had issue employing competent people in the past, and given the current level of investment in this project they would not risk losing their primary development resource. :) (pats self on back)

In theory it 'could' be done. Reality is it probably won't. Bureaucracy and process is bigger then self congratulating individuals in the Public Sector sadly. You could speak to IPSE. They are looking for examples where it's challenged but not sure how much help they'll actually be.

TheFaQQer
28th September 2017, 10:52
Thanks. That's the question...Should I be able to instruct the agency accountant to redirect part of my payment (pre-tax) into my pension fund.

I would be surprised if they can - this was a point I made directly to HMRC in a face-to-face meeting with senior staff.

You are looking to make employers contributions to a pension plan (I presume), but they aren't your employer - your limited company is your employer.

For tax purposes, a contribution to your pension plan by a third party would be classed as a personal contribution anyway - so as I understand it, they could make a post-tax contribution for you which would have no impact on your tax and NI bill but could limit your ability to make any further personal contributions depending on funding limits.

WordIsBond
3rd October 2017, 07:19
Are they obliged to do so when you request this service? I'd say no. It's not part of the contract and your engagement with them so it's a nice to have but if were them I wouldn't. You could ask if they would in individual case and the fact you've a long engagement so they may be flexible.
There is no contract, so you can't say it is not part of the contract. He's being asked to extend. Whether the agency legally can do it is something I doubt, but if they can, he can certainly ask to have it as part of the contract.

OP, if they need you that badly, simply say, "I was willing to take an inside IR35 contract for a limited time, but the taxes are too high. I can't even make pension payments without paying NI on it, and your employees don't have to pay NI on what you pay into their pensions, so I'm worse off than an employee when it comes to tax. Either you need to work with me to structure the contract and working practices to be outside IR35, or I need a 13.8% increase to cover the employer NI. Maybe you can get the agency to reduce their cut to help make up the difference." If they want to keep you on inside-IR35 terms, they should at least be willing to pay the employer NI.

If they restructure to outside, everything is straightforward. If they increase your rate, just make personal pension contributions out of post-tax funds. Sorted.

Be prepared for a counter-offer and know what is the minimum level you would accept. If they are fair, they'll consider it.