IR35 Confusion -

[WTFH]

I really did think we had covered all this back in March. In terms of running a consultancy - it's best to avoid any clients who deem you to be employees - it's just not worth the hassle.

I think it's been covered a few times, but isn't sinking in yet.

[jamesbrown]

On the 20%, the OP’s company is responsible for operating a deemed payment on the full amount it invoices (on which a deemed payment is due), not some fraction of it, in the same way the OP cannot pay a minimum salary through PAYE and the rest in dividends.

[hugebrain]

I notice that he says he's been trying to make changes over 2+ years, so we've got between 1 and 4 people who have been working full-time on a single site for multiple years. The client says they are inside - which will apply from April, but that would imply that they have been inside all along.

Now, what does that mean for his business?
I think that means that, let's say he's invoicing £1,000 per person per day into the client.
In his current model, he gets £1,000 per day for himself, and let's say he takes 20% from each of the others, he gets £200 each, they get £800 each

HMRC are expecting that PAYE tax etc will be paid on £1,000 per person per day. They are currently getting tax on £800 for each of the contractors, and (at a guess based on minimum salary) £20 for him
So, they want PAYE on £4,000, but for the last 2+ years they've been getting PAYE on £2,420.

...or am I totally wrong there?

But int terms of running a business, if you're inside IR35, there's no point in having your own LTD - there's no profit.

If understand the problem, it is that they want PAYE on the £4000 since he is in an IR35 caught contract, plus they want PAYE on the £2400 the 3 employees get. So, out of the of the £4000, the taxman gets say £3000, the employees get £1500, and he gets -£500.

The expense of hiring people to do the work wouldn’t be deductible cos IR35.

I expect and hope I’m wrong because it does sound a bit mad.

[eek]

From the advice I've had

There is zero problem with the employees being inside IR35 - they are supposed to be paid using PAYE and they are being paid to do so - this scenario is no different from any agency deducting their profit.

The issue comes when a shareholder (who takes money via dividends) does work on that same inside IR35 contract as suddenly both the invoices sent to the client for the work the shareholder did and all profits taken from the work the employees have done are subject to IR35.

As I said over a year ago the only way around this issue is to make 100% sure that directors and employees who are shareholders of the company do not do any charged work for clients that insist the project is inside IR35.

[pauljh]

From the advice I've had

There is zero problem with the employees being inside IR35 - they are supposed to be paid using PAYE and they are being paid to do so - this scenario is no different from any agency deducting their profit.

The issue comes when a shareholder (who takes money via dividends) does work on that same inside IR35 contract as suddenly both the invoices sent to the client for the work the shareholder did and all profits taken from the work the employees have done are subject to IR35.

As I said over a year ago the only way around this issue is to make 100% sure that directors and employees who are shareholders of the company do not do any charged work for clients that insist the project is inside IR35.

Just to confirm, this is 100% correct, I won't pay more tax for my PAYE employees and basically I won't be working..

[Plonitus]

Percentage of Permanent Roles to Outside Contracting Roles

Just a quick question and could have been asked before. Bu


What percentage do you foresee of permanent roles to outside IR35 after April 2020? I have had 2 agents saying 80% to 90% permanent.

[eek]

Just a quick question and could have been asked before. Bu


What percentage do you foresee of permanent roles to outside IR35 after April 2020? I have had 2 agents saying 80% to 90% permanent.

What has permanent roles got to do with IR35..

[northernladuk]

Just a quick question and could have been asked before. Bu

What percentage do you foresee of permanent roles to outside IR35 after April 2020? I have had 2 agents saying 80% to 90% permanent.

No one knows and if an agents lips are moving they are lying. Can't see the point of that question either as you haven't mentioned inside or FTC's either so there is no answer worth giving.

[b0redom]

From the advice I've had

There is zero problem with the employees being inside IR35 - they are supposed to be paid using PAYE and they are being paid to do so - this scenario is no different from any agency deducting their profit.

The issue comes when a shareholder (who takes money via dividends) does work on that same inside IR35 contract as suddenly both the invoices sent to the client for the work the shareholder did and all profits taken from the work the employees have done are subject to IR35.

As I said over a year ago the only way around this issue is to make 100% sure that directors and employees who are shareholders of the company do not do any charged work for clients that insist the project is inside IR35.

Taking this a step further, if you were a proper consultancy with permies, lets say you're billing 3 permies and a director in at £1k/day each.

Each permie gets - say £300/day and the director takes like £1k/day all as PAYE. I'm not sure how you'd demonstrate that you're all inside IR35 without showing pay checks, which would show margins etc and probably be bad from a business perspective - but that's an aside.

Let's say other costs for the permies run to £200 each/day. That leaves ~ £500 x 3 employees x 20 billable days = ~ £30k - are we saying that's not available as a dividend either, or is it only allowable as a dividend to someone who doesn't work on that customer? I can't see how that could work either, what would stop a company with 2 consultants working for 2 separate clients, cross billing?

[eek]

Taking this a step further, if you were a proper consultancy with permies, lets say you're billing 3 permies and a director in at £1k/day each.

Each permie gets - say £300/day and the director takes like £1k/day all as PAYE. I'm not sure how you'd demonstrate that you're all inside IR35 without showing pay checks, which would show margins etc and probably be bad from a business perspective - but that's an aside.

Let's say other costs for the permies run to £200 each/day. That leaves ~ £500 x 3 employees x 20 billable days = ~ £30k - are we saying that's not available as a dividend either, or is it only allowable as a dividend to someone who doesn't work on that customer? I can't see how that could work either, what would stop a company with 2 consultants working for 2 separate clients, cross billing?

Pass. In reality I have a very simple viewpoint if you believe I'm inside IR35 we won't be doing work for you.