Outside then inside

[Grim Reaper]

Just as a matter of interest; if you were in a contract that was outside IR35 and you were claiming dividends with a small PAYE salary etc, then the next contract you won was reviewed and deemed as inside, what could you do to remain risk free?
Switch over to full PAYE for the duration of the contract?
This is on the assumption that the agency couldn't change the contract or perhaps you wanted the work.
Sorry if its an obvious one but I have just set up a ltd and have had varied contract terms in the past, but was with an umbrella therefore never came across the issue.

[Old Greg]

Just as a matter of interest; if you were in a contract that was outside IR35 and you were claiming dividends with a small PAYE salary etc, then the next contract you won was reviewed and deemed as inside, what could you do to remain risk free?
Switch over to full PAYE for the duration of the contract?
This is on the assumption that the agency couldn't change the contract or perhaps you wanted the work.
Sorry if its an obvious one but I have just set up a ltd and have had varied contract terms in the past, but was with an umbrella therefore never came across the issue.

Have never been inside IR35 but that's the idea. However, if you've already hit the higher rate threshold in that year you are going to be hammered on Tax / NI. May be worth considering putting deemed salary value (especially if a short one) into a pension? IANAA etc. etc.

[Martin at NixonWilliams]

Just as a matter of interest; if you were in a contract that was outside IR35 and you were claiming dividends with a small PAYE salary etc, then the next contract you won was reviewed and deemed as inside, what could you do to remain risk free?
Switch over to full PAYE for the duration of the contract?
This is on the assumption that the agency couldn't change the contract or perhaps you wanted the work.
Sorry if its an obvious one but I have just set up a ltd and have had varied contract terms in the past, but was with an umbrella therefore never came across the issue.

It wouldn't quite be 'full PAYE' - There is a 5% allowance and certain expenses that can be decucted before you arrive at the amount to be paid as salary.

I understand you are new to contracting through a limited company. If you haven't already, look into registering for the VAT flat rate scheme.

I hope this helps.

Martin

[Grim Reaper]

Thank you Martin.
So you can switch between full PAYE (inside) and then back to PAYE plus divs, when the next compliant contract comes along and end up with a hybrid accounting model come year end ? OR would an investigation nail you for being inside all along due to dabbling with both ?
As you know HMRC look beyond the written contract as they can be adjusted to disguise the fact that I'm using raiding my clients stationary cupboard and drinking their tea all day.

[northernladuk]

Yes you can. IR35 is on a contract by contract basis so you will have to account differently for each. Not too dissimilar to being permie for part of the year and then switching to Contractor. Just because you were permie it has no basis on the status of your contract etc. Nothing wrong with having a mix during the year as long as your accounts have been prepared properly.

If you have set up an LTD you should have engaged an accountant. Sit down with him and he will be able to advise the best way to approach this including ideas like OG's

[Martin at NixonWilliams]

Thank you Martin.
So you can switch between full PAYE (inside) and then back to PAYE plus divs, when the next compliant contract comes along and end up with a hybrid accounting model come year end ? OR would an investigation nail you for being inside all along due to dabbling with both ?
As you know HMRC look beyond the written contract as they can be adjusted to disguise the fact that I'm using raiding my clients stationary cupboard and drinking their tea all day.

You're welcome!

It is fine to have two separate contracts even if the IR35 status of one contract is different from the other. In terms of an investigation, each contract will be judged in its own right.

There would be no different accounting treatment. However, the detailed profit and loss may look slightly odd for a contractor as there it would normally show either a very small salary (non-IR35) or a high salary (IR35). In the circumstances you mention, the salary could be anywhere inbetween depending on the timing of the contract change and the company's yearend etc.

You are correct in saying HMRC would look at the working practices aswell as the written contract!

Martin