IR35 and PAYE Question

[croggywhite]

New to contracting so apologises if I'm repeating any earlier post.

If I really need to get my hands on any money paid into my Ltd company account and decide to pay the whole lot out each month as Salary through PAYE (including Employers, Employees NI) could I still be subject to IR35? Isn't this what an umberalla company would do for me?

[xoggoth]

Paying money out as salary or not has no bearing on whether you are subject to IR35 or not.

If you are caught then any salary you have paid is subtracted from the required payment. If you pay an amount of salary that is at least equal to the required payment then you will not be liable for any further payment under IR35.

[croggywhite]

Thanks Xoggoth, so even if I worked through an umbrella company, IR35 could still kick in due to the terms of the contract? If so, isn't the 'avoidance of IR35' claims from umbrella companies misleading?

[4Contractors]

If so, isn't the 'avoidance of IR35' claims from umbrella companies misleading?

Yes it is.

some claim to get around IR35 but do so by simply paying the IR35 tax.

[Bradley]

Umbrellas

some claim to get around IR35 but do so by simply paying the IR35 tax

I don't think the Revenue would consider umbrellas are caught by IR35 at all unless the workers are also shareholders.

The difference between being an IR35 caught contractor and an umbrella "employee" is that employees will get more expenses allowed than the IR35 caught contractor e.g. training costs, relocation costs etc

[4Contractors]

Re: Umbrellas

That's right Bradley.

The point is these umbrella companys imply that by joining them you will be avoiding IR35 and gain some sort of financial advantage, which is clearly misleading.

[Bradley]

Re: Umbrellas

The point is these umbrella companys imply that by joining them you will be avoiding IR35

If you do join an umbrella you will be outside of IR35 if you're not a shareholder so how's that misleading?

and gain some sort of financial advantage

Well you do because the range of expenses you can claim is greater
How is it misleading to say these things?

[4Contractors]

Re: Umbrellas

Bradley I'm confused by your argument so please explain things clearly to me.

IR35 Ltd company = claim all travel expenses, claim up to 5% of turnover as expenses. Everything else treated as salary

Umbrella = claim all travel expenses. Everything else treated as salary

Therefore the ordinary umbrella arrangement misses out on the up to 5% of turnover claimable as expense via a limited company.

Have I missed something here or are we talking at cross purposes ?

[IR35 Avoider]

Re: Umbrellas

you will be outside of IR35 if you're not a shareholder

To be pedantic, it's not enough not to be a shareholder, you also need to not receive any non-PAYE income that could reasonably taken to be proceeds of individual contracts.

A normal umbrella pays everything as salary, which does indeed put you legally outside the scope of IR35, but without making you better off.

IR35 was intended to increase the amount of contractor income that was taxed as salary - it's hardly surprising that joining an umbrella where all your income is taxed as salary is going to put you outside the scope of it. (Obviously expenses are not taxed as salary, but then they aren't income either, they are costs, which I generally try to minimise and have typically managed to keep below 2K per year.)

I guess there may be some circumstances where a contractor with very high expenses can reclaim something through an umbrella that he couldn't reclaim through his own company, however my expenses would have to increase a few hundred percent before this even became an issue, so I find it difficult to imagine. I suppose the sort of contractor who might be better of through an umbrella is someone earning 30K - 40K per year who spends 5K on courses and would definitely be IR35 caught if contracting through his own company.

[ASB]

Eh?

To be pedantic, it's not enough not to be a shareholder.

To be factual. It is.

Caveat: unless of course you were referring to the ability to control 5% or more without actually owning it in which case it could still apply.

See FA 2000 3 (3) an 3 (4). Could be diffferent sections in FA2004 of course.

Eidt, oops that's crap. It's an OR.