New Role Inside IR35 New Role Inside IR35
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  1. #1

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    Default New Role Inside IR35

    Hi,

    I've accepted a new role inside IR35 and have two questions.

    1. There will be an overlap of two weeks of my old role outside IR35 and my new role inside IR35 where I will be invoicing for some days with my old client and some days with my new client. Are there any concerns there? Will having an inside IR35 role at the same time as an outside IR35 role have any chance bringing my outside role, inside. I wouldn't think it would as they are seperate entities but wanted to check.

    For those contractors who work inside IR35 and get paid via their limited company....

    2. When calculating a salary for yourself are you allowed to use market rates. I.e. the market rate for a developer in the area I am in is around 35-55k a year. The contract could be worth 100k a year to my limited. Is it fair and acceptable in HMRCs view to give myself a salary of 35k a year, or would they expect me to pay myself the entire contract value minus allowances for company running and employer NIC?

    With an umbrella you don't have the choice so the employer NIC is paid on the entire contract value minus umbrella costs. But my accountant advises via limited I could pay myself any salary as long as its fair with the market rate. And the market rate for a developer in my area isn't 100k but is around 40k, which means the employer NIC would be a lot less.

    Can anyone who is inside IR35 advise on what is technically accurate.

    Thanks.

  2. #2

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    Quote Originally Posted by RichG View Post
    Hi,

    I've accepted a new role inside IR35 and have two questions.

    1. There will be an overlap of two weeks of my old role outside IR35 and my new role inside IR35 where I will be invoicing for some days with my old client and some days with my new client. Are there any concerns there? Will having an inside IR35 role at the same time as an outside IR35 role have any chance bringing my outside role, inside. I wouldn't think it would as they are seperate entities but wanted to check.

    For those contractors who work inside IR35 and get paid via their limited company....

    2. When calculating a salary for yourself are you allowed to use market rates. I.e. the market rate for a developer in the area I am in is around 35-55k a year. The contract could be worth 100k a year to my limited. Is it fair and acceptable in HMRCs view to give myself a salary of 35k a year, or would they expect me to pay myself the entire contract value minus allowances for company running and employer NIC?

    With an umbrella you don't have the choice so the employer NIC is paid on the entire contract value minus umbrella costs. But my accountant advises via limited I could pay myself any salary as long as its fair with the market rate. And the market rate for a developer in my area isn't 100k but is around 40k, which means the employer NIC would be a lot less.

    Can anyone who is inside IR35 advise on what is technically accurate.

    Thanks.
    Get a new accountant.
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    I admit that I'm a lazy lying cretin, but so what?
    25 June 2018

  3. #3

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    Quote Originally Posted by RichG View Post
    Hi,

    I've accepted a new role inside IR35 and have two questions.

    1. There will be an overlap of two weeks of my old role outside IR35 and my new role inside IR35 where I will be invoicing for some days with my old client and some days with my new client. Are there any concerns there? Will having an inside IR35 role at the same time as an outside IR35 role have any chance bringing my outside role, inside. I wouldn't think it would as they are seperate entities but wanted to check.
    No, if anything it points to the new contract being outside IR35 since multiple concurrent roles are not something a permanent employee would normally be allowed to do by an employer.

    Quote Originally Posted by RichG View Post
    For those contractors who work inside IR35 and get paid via their limited company....

    2. When calculating a salary for yourself are you allowed to use market rates. I.e. the market rate for a developer in the area I am in is around 35-55k a year. The contract could be worth 100k a year to my limited. Is it fair and acceptable in HMRCs view to give myself a salary of 35k a year, or would they expect me to pay myself the entire contract value minus allowances for company running and employer NIC?

    With an umbrella you don't have the choice so the employer NIC is paid on the entire contract value minus umbrella costs. But my accountant advises via limited I could pay myself any salary as long as its fair with the market rate. And the market rate for a developer in my area isn't 100k but is around 40k, which means the employer NIC would be a lot less.

    Can anyone who is inside IR35 advise on what is technically accurate.

    Thanks.
    If you are inside IR35 then the agency or umbrella are regarded as your employer, not your Ltd. company. All payments made via your limited are deemed to be salary paid to you (less 5% for expenses). You have no leeway on this.

    Trying anything else will see you ending up as one of HMRC's few success stories in prosecuting tax evaders under IR35.
    "Being nice costs nothing and sometimes gets you extra bacon" - Pondlife.

  4. #4

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    Quote Originally Posted by Old Greg View Post
    Get a new accountant.
    ^^ this.
    "Being nice costs nothing and sometimes gets you extra bacon" - Pondlife.

  5. #5

    I live on CUK

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    Quote Originally Posted by DaveB View Post
    No, if anything it points to the new contract being outside IR35 since multiple concurrent roles are not something a permanent employee would normally be allowed to do by an employer.



    If you are inside IR35 then the agency or umbrella are regarded as your employer, not your Ltd. company. All payments made via your limited are deemed to be salary paid to you (less 5% for expenses). You have no leeway on this.

    Trying anything else will see you ending up as one of HMRC's few success stories in prosecuting tax evaders under IR35.
    Is that 5% true for public sector?
    Quote Originally Posted by Bean
    I admit that I'm a lazy lying cretin, but so what?
    25 June 2018

  6. #6

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    Quote Originally Posted by Old Greg View Post
    Is that 5% true for public sector?
    As far as I am aware,yes. It's a blanket allowance under the legislation. Unless they made a specific change in respect of the PS, which I dont belive they did.

    INAAA.
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  7. #7

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    DaveB

    That was my understanding so nice to have it confirmed... is my following example accurate?

    So Agency pays my Ltd 100k over the year for example (in this scenario imagine I'm paid once at the end of a years worth of work)

    A) My limited takes 5% of that to cover running costs, so £5,000.

    Then.

    B) There is an employer NIC bill at 13.5% of £95,000 = £12,825

    And then the remaining £82,175 is paid to me as gross salary with tax and employee NIC to be deducted at payroll before appearing in my personal bank?

    ...

    C) if the running costs of the business were less than £5,000 any remaining money left in my limited from that I could take as a dividend?

  8. #8

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    Quote Originally Posted by RichG View Post
    DaveB

    That was my understanding so nice to have it confirmed... is my following example accurate?

    So Agency pays my Ltd 100k over the year for example (in this scenario imagine I'm paid once at the end of a years worth of work)

    A) My limited takes 5% of that to cover running costs, so £5,000.

    Then.

    B) There is an employer NIC bill at 13.5% of £95,000 = £12,825

    And then the remaining £82,175 is paid to me as gross salary with tax and employee NIC to be deducted at payroll before appearing in my personal bank?

    ...

    C) if the running costs of the business were less than £5,000 any remaining money left in my limited from that I could take as a dividend?
    A and B are correct on my understanding of the legislation. Don't know about C. Even if you could declare a Divi from that you would already be in the upper tax bracket so would end up paying full PAYE / NI on it personally. The saving on employers NI would be minimal.
    "Being nice costs nothing and sometimes gets you extra bacon" - Pondlife.

  9. #9

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    Is this private or public sector?

    The 5% does not apply to public sector - it was dropped from the legislation.

    All the income from the contract is subject to employment deductions (less 5% for private sector) - who makes those deductions will vary depending on public or private sector. Market rates don't come into it.

    See https://www.gov.uk/guidance/how-to-c...oyment-payment for private sector. Public sector the agency/client will be doing it for you.

  10. #10

    Nervous Newbie

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    Thanks for the replies everyone.

    It seems umbrella is the way to go for this. No accountancy fees, no hassle, and if I have to take the entire money coming into my business as salary (and my accountant was giving me misinformation that I could pay myself market rate instead) then yeah umbrella.

    Ok cheers all - been very helpful.

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