a question about IR35?

[2uk]

I wanna know if i understand this correctly.

Under a LC, If you get caught by IR35 for a given contract , all revenue from this contract needs to be paid to you according to PAYE ( so that u pay the NICs) .

In this sense if you are caught you are basically paying both PAYE and LC corporation tax - resulting in somewhat double-taxation ? Is this correct ?

OR , In IR35 caught contracts, you get paid directly by the client accoring to PAYE , without sending the money to the LC first ?

[Sockpuppet]

No. CT is only paid from profits. The higher wages reduces the profits so no CT tax due on the amount of wages.

[2uk]

So basically if i am caught by IR35 all the taxes I am paying ( for this particular contract ) would be these that a permie would pay ?

[The Lone Gunman]

So basically if i am caught by IR35 all the taxes I am paying ( for this particular contract ) would be these that a permie would pay ?

No, you would be paying a lot more than that.

[MrsGoof]

So basically if i am caught by IR35 all the taxes I am paying ( for this particular contract ) would be these that a permie would pay ?

You'd be paying Employer NI contributions which higher than Employee contributions

[Nixon Williams]

So basically if i am caught by IR35 all the taxes I am paying ( for this particular contract ) would be these that a permie would pay ?

If the contract is caught by IR35 most of the income from the contract would be paid under the PAYE rules. However advantages over permies include:

1. 5% allowance for other expenses, whilst not a lot this can be a help and any unused amount can be paid as a dividend.

2. You can claim travel/accommodation expenses etc, these are not available to permies.

3. You can join the VAT Flat Rate scheme, although this additional income will also be subject to PAYE this would boost your gross income by 3.4% in year 1

4. Yes you do pay employer NIC, but yiur rate should be higher than you would get as a permie to compensate for this.

Whilst being caught by IR35 is not nice, it is not all doom and gloom, I hope I have shown this above.

Alan

[Cowboy Bob]

So basically if i am caught by IR35 all the taxes I am paying ( for this particular contract ) would be these that a permie would pay ?

You'll be paying your normal permie PAYE contributions as well as all the employer's contributions on top.

[2uk]

Thanks All.

From what I read , i think the first thing i should do , when i get my first contracts , is to send it directly to my accounting company for review and possible adjustment so that its not caught by IR35. Should i expect such service from my accountant ?

[Back In Business]

Your accountant may provide this service but they will normally charge for it. They might also look at it for free and give you an opinion on whether it's in or out. There are specialists (like B&C) who will go over you contract in detail and will also try and get it sorted for you.

However, the contract is only half the story. Your working practises can also be investigated and if you are working as an employee you are inside IR35 even if your contract (on paper) isn't. Register with the PCG and read their guide on the topic.

[2uk]

Thanks.