IR35 Employers NI

[Vincenth1]

I'm thinking about accepting a contract with the MOD/army. The role was advertised as a day rate inside IR35, Umbrella, Company or PAYE. I don't think I've seen any MOD role outside since the new legislation came in, so it feels like MOD practice is everything is blanket inside. I don't think it's an option to ask for an uplift on rate, but I'm keen on the role as I think it's an interesting piece of work.
I have read on this site that if your caught by IR35 by default that deducting employers NI from the agreed rate is unlawful as Employer's NI is supposed to be paid on top of the agreed rates by the deemed employer, which if I went brolly would be the Umbrella. I have been in this situation before and of course what happens is that the Umbrella takes it out of your daily rate, which is a considerable chunk. I read here that contractors can reclaim what is rightfully theirs by employment tribunal, county court or HMRC within 3 months of leaving.
What's people's view on this?

[plannercontractor]

Hi there, you won't get much support on here I'm afraid. Before Sarah Winchester's case they would have been quick to reply with comments to stop you from fighting (especially against the HMRC). But fortunately for people like us, Ms Winchester's case has significantly changed the circumstances and put us back in the game.

Like you (possibly), I was operating (at a local authority) under my own ltd. company but when IR35 kicked in, I found myself paying both NI contributions + apprenticeship levy and umbrella uplifts but my hourly rate wasn’t uplifted to cover this. Suddenly my monthly income drops by over £300 (factoring in my accountants fee from the ltd. company) and I still have to save for time off, holidays etc. But in the meantime my mortgage goes up, to make ends meet, I borrow against my ltd. company from money I have been saving to pay corporation tax and I get a penalty tax from the HMRC in the form of S455 tax, and interest on corporation tax due which I am now paying monthly on a repayment plan.

I wrote to the HMRC and told them why I couldn't afford my Corporation Tax and why they shouldn't charge me S455 penalty tax because IR35 led me to not being able to pay them. This was in February this year and many people on here thought the HRMC owes me no explanation or any response and I still haven't got one to this day. The tide is slowly turning however and soon this IR35 thing would be the new PPI claim, mark my word for it!

I found contractorcalculator.co.uk and IPSE more friendly and interested than here. Try them!

[northernladuk]

Hi there, you won't get much support on here I'm afraid. Before Sarah Winchester's case they would have been quick to reply with comments to stop you from fighting (especially against the HMRC). But fortunately for people like us, Ms Winchester's case has significantly changed the circumstances and put as back in the game.

What is this us? PS for lifers? Surely being a contractor you can pick a different client rather than see yourself stuck in the PS for the rest of your career?

Like you (possibly), I was operating (at a local authority) under my own ltd. company but when IR35 kicked in, I found myself paying both NI contributions + apprenticeship levy and umbrella uplifts but my hourly rate wasn’t uplifted to cover this. Suddenly my monthly income drops by over £300

The 300 is a typo yes?

(factoring in my accountants fee from the ltd. company) and I still have to save for time off, holidays etc. But in the meantime my mortgage goes up, to make ends meet, I borrow against my ltd. company from money I have been saving to pay corporation tax and I get a penalty tax from the HMRC in the form of S455 tax, and interest on corporation tax due which I am now paying monthly on a repayment plan.

So why didn't you leave and get a proper contract?

I wrote to the HMRC and told them why I couldn't afford my Corporation Tax and why they shouldn't charge me S455 penalty tax because IR35 led me to not being able to pay them. This was in February this year and many people on here thought the HRMC owes me no explanation or any response and I still haven't got one to this day. The tide is slowly turning however and soon this IR35 thing would be the new PPI claim, mark my word for it!

S455 isn't a penalty tax and you can claim it back later
Reclaiming section 455 tax

I assume you mean the penalty on not paying your CT?

[DaveB]

I'm thinking about accepting a contract with the MOD/army. The role was advertised as a day rate inside IR35, Umbrella, Company or PAYE. I don't think I've seen any MOD role outside since the new legislation came in, so it feels like MOD practice is everything is blanket inside. I don't think it's an option to ask for an uplift on rate, but I'm keen on the role as I think it's an interesting piece of work.
I have read on this site that if your caught by IR35 by default that deducting employers NI from the agreed rate is unlawful as Employer's NI is supposed to be paid on top of the agreed rates by the deemed employer, which if I went brolly would be the Umbrella. I have been in this situation before and of course what happens is that the Umbrella takes it out of your daily rate, which is a considerable chunk. I read here that contractors can reclaim what is rightfully theirs by employment tribunal, county court or HMRC within 3 months of leaving.
What's people's view on this?

Point them to the Winchester case and ask if they will be paying holiday pay, sick pay, etc. or uplifting the rate to compensate for lack of employee benefits.

[plannercontractor]

What is this us? PS for lifers? Surely being a contractor you can pick a different client rather than see yourself stuck in the PS for the rest of your career?

The 300 is a typo yes?

So why didn't you leave and get a proper contract?

S455 isn't a penalty tax and you can claim it back later
Reclaiming section 455 tax

I assume you mean the penalty on not paying your CT?

My point proven! As I've told you before I'm not a job hopper and I wasn't going leave for such petty reasons when I had a job that I enjoyed doing with good colleagues and supportive managers. Why don't you write an open letter to Susan Winchester and ask her why didn't she do the same instead of taking the HMRC to a tribunal? I'll change job when and how I want to but not forced by a flawed and misclaculated legislation.

And no £300 is not a typo, I factored in my accountants cost, self-assessment/CT, insurance, PAYE liabilities etc. Whilst £300 might be nothing to you, it is something for people like me with a mortgage...in London!

In regard to S455 tax, my accountants told me that it is not refundable after 9 months if you’re still paying CT due for that tax year. Since you're very pro-HMRC and support their ill-informed decision about PS IR35 maybe you can advise me otherwise. I've rang and written to them countless of times and they have not offered any useful or in fact, no advice so far. It's a constant game of passing the parcel with the HMRC.

Assume what you want about me not paying CT, I see you've deliberately missed the point where I've said that I'm on an arranged re-payment plan with them and maybe I should tell you that £4,500 was paid upfront on the £8,000 that was due.

[cojak]

The CUK forum is for those contractors who do it by choice and it’s in their nature to genuinely not understand those contractors who have been forced into contracting by circumstances of their former employers refusing to take employees.

It will take a little while for “choice” contractors to get their heads around the idea (and day-rate - £300 is not a typo NLUK) of “forced” contractors.

I have created a thread for this very reason. https://www.contractoruk.com/forums/...ting-read.html

[plannercontractor]

The CUK forum is for those contractors who do it by choice and it’s in their nature to genuinely not understand those contractors who have been forced into contracting by circumstances of their former employers refusing to take employees.

It will take a little while for “choice” contractors to get their heads around the idea (and day-rate - £300 is not a typo NLUK) of “forced” contractors.

I have created a thread for this very reason. https://www.contractoruk.com/forums/...ting-read.html

Sure, I get your point but anyone who provides a service to a PS organisation more than 35+ hours a week for more than 6 months a year and especially if that service is one of the core functions of that organisation, then the person should be classed within IR35 regardless of how much control they have over the contract. The key thing here is the 6 months, as this is the probationary period for most job and an organisation must decide whether they need you or if you are good enough for them by this point.

E.g. if in your household you employ a cook, a nanny, a cleaner and a gardener. The cook and the nanny will almost certainly be within IR35 as they provide a primary service, as you need to eat every day and your kids need looking after during weekdays when you're at work or even at weekends.

The cleaner and gardener would most certainly be outside IR35 as most households might need deep cleaning about twice a week and you certainly don't need a gardener in the winter months. Hence, the nature of their jobs is more ad-hoc than the cook and nanny, and they might have multiple employers to make up a full week’s work.

The point I'm making is if you're providing a service the PS organisation cannot do without and is part of their core services, you should be within IR35 as you are more or less an employee. Outside IR35 contractors should only provide ancillary services in my opinion.

[mudskipper]

Sure, I get your point but anyone who provides a service to a PS organisation more than 35+ hours a week for more than 6 months a year and especially if that service is one of the core functions of that organisation, then the person should be classed within IR35 regardless of how much control they have over the contract. The key thing here is the 6 months, as this is the probationary period for most job and an organisation must decide whether they need you or if you are good enough for them by this point.

E.g. if in your household you employ a cook, a nanny, a cleaner and a gardener. The cook and the nanny will almost certainly be within IR35 as they provide a primary service, as you need to eat every day and your kids need looking after during weekdays when you're at work or even at weekends.

The cleaner and gardener would most certainly be outside IR35 as most households might need deep cleaning about twice a week and you certainly don't need a gardener in the winter months. Hence, the nature of their jobs is more ad-hoc than the cook and nanny, and they might have multiple employers to make up a full week’s work.

The point I'm making is if you're providing a service the PS organisation cannot do without and is part of their core services, you should be within IR35 as you are more or less an employee. Outside IR35 contractors should only provide ancillary services in my opinion.

Can you link to the case law that backs your assertions?

[cojak]

Can you link to the case law that backs your assertions?

He did say that it was his opinion (rather than an assertion).

But since he is inside IR35 for what he considers to be a ‘core service’, the natural conclusion I guess is that he thinks that he is paying the right amount of tax, although I’m not sure as he was complaining about the loss of income. Maybe this bit is a little confused?

Certainly if you want to follow the 6 months probationary period for being outside/inside IR35, then you should leave the contract after the 6 months are up, as the rest of us ‘job hoppers’ do.

Also plannercontractor can now also ask for the rights that Susan Winchester claimed, as he is paying that tax.

[northernladuk]

So really his problem is that he's engaged incorrectly and should be on an FTC so would be better sorting his engagement out rather than trying to fix situation that isn't fit for his purpose?