Originally posted by WordIsBond
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IR35 : >42% tax, and call it fair?
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Originally posted by JohntheBike View Postthere is very little noise about the "unfairness" of the fact that employees are able to offset their tax and NIC bill by making pension contributions, whereas contractors post March 2020 will not be able to do this. Additionally, if the employer makes a contribution to the employee's pension, then that also is tax deductible. Nobody is commenting much on this issue.Best Forum Adviser & Forum Personality of the Year 2018.
(No, me neither).Comment
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Originally posted by webberg View PostAnd how does an employee offset NIC by making a pension contribution?Comment
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Originally posted by JohntheBike View Postbecause tax and NIC are calculated after the deduction of the pension payment and this will not be allowed for an inside IR35 contract. I'm not sure why you are asking me this question.
Your assumption is that the payment from the end client/agency - inside IR35 - is going to the PSC and that there is an obligation upon the PSC to make deductions.
However the PSC has made a pension payment thus reducing the tax and NIC.
The PSC is making the pension payment.
Is that correct.Best Forum Adviser & Forum Personality of the Year 2018.
(No, me neither).Comment
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Originally posted by webberg View PostAh I see.
Your assumption is that the payment from the end client/agency - inside IR35 - is going to the PSC and that there is an obligation upon the PSC to make deductions.
However the PSC has made a pension payment thus reducing the tax and NIC.
The PSC is making the pension payment.
Is that correct.
HMRC has specifically stated that this facility will not be allowed for contractors under the new rules. Yes, individuals will be able to claim tax relief on their contributions, but not directly through the fee payer in the same way as an employee could.
I know that NIC rules have changed over the years and they are a bit of a minefield, especially considering and individual's SERPS position. But the deduction of pension contributions from gross before further calculations has always been a fundamental provision. That's why we are taxed when we receive our pensions, because it suits HMG that way.
Additionally, if an employer makes a contribution to an employee's pension fund, then those contributions can be set off against the corporation tax bill. None of these provisions will be allowed under the new rules.Comment
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Originally posted by JohntheBike View Postno, what I'm saying is that if I'm an employee, then the amount that I pay to my pension is deducted from the gross prior to any tax and NIC liability being calculated.
Where it's not, and it's an employee's pension contribution, NIC typically isn't saved on th pension amount, and sometimes higher rate tax relief isn't claimed either unless the individual makes a specific claim. I think this is something that an awful lot of people (including professionals) missed, and is why many employers are drifting towards salary sacrifice instead of employee contributions.Comment
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Originally posted by Maslins View PostNot always true. Depends on whether it's done via salary sacrifice in return for larger employer pension contribution.
Where it's not, and it's an employee's pension contribution, NIC typically isn't saved on th pension amount, and sometimes higher rate tax relief isn't claimed either unless the individual makes a specific claim. I think this is something that an awful lot of people (including professionals) missed, and is why many employers are drifting towards salary sacrifice instead of employee contributions.
I see nobody questioning this position with regard to EU (we're still in it) taxation rules, which I understand, but someone here is bound to correct me, that the targeting of an identifiable section of people for special taxation provisions is unlawful. No one seems to be discussing these issues.Comment
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Originally posted by JohntheBike View Postno, what I'm saying is that if I'm an employee, then the amount that I pay to my pension is deducted from the gross prior to any tax and NIC liability being calculated.
I do not agree that it reduces NIC unless as mentioned above you are in some form of salary sacrifice arrangement.
I do think that as I said earlier a sum paid to a PSC that is to be treated as income of the individual who is inside IR35, can be reduced for both tax and NIC purposes by the PSC making a contribution.
So in general the contribution from Maslins above I prefer as the better analysis.Best Forum Adviser & Forum Personality of the Year 2018.
(No, me neither).Comment
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Originally posted by webberg View Postboth instances are doing so in the same capacity, i.e. individuals.
Originally posted by webberg View PostPSC acts as an employer and is liable to deduct tax and NIC.
Originally posted by webberg View Postregard the PSC as little more than a staging post?
Originally posted by WordIsBondtaking home more money even if they are doing 'the same job’
>PSC doesn’t want to see itself as an individual. If the govt wants to (wrongly) see the PSC as an individual, then the principles that binds individuals must be invoked.
Originally posted by WordIsBondcontractor's receipts are payment in lieu of untaxed benefits/rights...use a deemed payment based on about 65-70% to reflect thatOriginally posted by Hobosapien'tax due' assessment on … all the employer/employee taxes and employee benefits would be includedComment
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Originally posted by Hobosapien View PostContracting inside IR35 via a Ltd will be less efficient than via an umbrella (already is if contracting in public sector) as the accounting fees alone will likely offset the umbrella fees if not being fleeced. Then there's all the other hassles and costs of running a Ltd if used solely for contracting.
Even the idea of avoiding inside IR35 contracts if persevering with a Ltd is not guaranteed to be more efficient, as the bench time between contracts if the outside IR35 contracts are scarce means those doing inside IR35 gigs via a brolly (with a suitable rate uplift if can secure it ) have one less thing to worry about when looking for new contracts and whether to dismiss them.
I've just done a search and that still seems to be the case today
LINK: Please note our Professional Indemnity policy does not cover workers in the following trades:Actuaries/Independant Financial Advisors
So if clients do blanket inside determinations, it seems the possibilities would be
* Umbrella companies start covering actuaries/IFAs (possbilly at a higher monthly fee)
* New umbrella companies are launched focussing on actuaries/IFAs
* Umbrella companies insist that actuaries/IFAs still take out a separate PI policy costing £1500+/year
* Contract inside35 via the Ltd and not get a single penny of tax relief towards £1,500 PI or accountancy costsComment
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