Hi,
Contacted a couple of contractors in the same sort of role as me, and apart from 90% of them having absolutely no knowledge of Aprils IR35 legislation - and I mean none at all -we started discussing deemed payments and how this would look if being investigated by HMRC and having the decision go against you. Most of us are on 6 month contracts until Dec, and have just been offered an extension until March. I’ve had my contract and WP classed as outside by QDoS but I’m the only one who has as far as I’m aware. I have no doubt the client will deem us all as inside.
I understand I should ask my accountant to look at this but as I was trying to get my head around it I thought I’d see if my understanding of working it out is overall correct. I realise theres a few things I dont know figure wise. I’ve based my workings on a scenario not too far removed from my own, with a daily rate of £300 per day and going back for the 6 months of contract presuming 20 days per month.
Would the following calculation be along the right lines? Any comments on where I go wrong would be appreciated?
Step 1: Deduct 5% from your off-payroll income.
20 x 6 x 300 = £36000
36000 x 0.05 – 1800
Total = £34200
Step 2: Add payments directly to the worker (by the client)
0
Step 3: Deduct expenses
As I use my car for site visits this varies depending on how many sites I choose to visit. I can average this out to £700 a month.
£700 x 6 = £4200
So 34200 – 4200 = £30000
Step 4: Deduct Capital allowances
Nice round figure of £500 for tools specific for job.
30000 -500 = £29500
Step 5: Deduct Pension contributions.
0 (I know I know)
Step 6: Deduct Employer NICs
Not sure where I find this
Step 7: Deduct Salary and benefits already paid to the worker
29500 – (£718 x 6) = £25192
Step 8 Deduct Employer NICs on the deemed payment
Again, don’t know where to get this
So would I be taxed on this amount of £25192 (ignoring NICs at the moment)
£25192 – Pers Allow of 12500 = £13192
I’m in Scotland so starter rate of 13192 @19% = £2506
Would this be about right? Seems very low to me.
Considering Corp tax paid as well of usually about 9k per year this doesn’t seem that bad, so I’m obviously missing something out somewhere. As before any dissection would be appreciated. I’m not worried about actual figures, just trying to get my head around what would happen if the dark side go back a few contracts.
cheers
Contacted a couple of contractors in the same sort of role as me, and apart from 90% of them having absolutely no knowledge of Aprils IR35 legislation - and I mean none at all -we started discussing deemed payments and how this would look if being investigated by HMRC and having the decision go against you. Most of us are on 6 month contracts until Dec, and have just been offered an extension until March. I’ve had my contract and WP classed as outside by QDoS but I’m the only one who has as far as I’m aware. I have no doubt the client will deem us all as inside.
I understand I should ask my accountant to look at this but as I was trying to get my head around it I thought I’d see if my understanding of working it out is overall correct. I realise theres a few things I dont know figure wise. I’ve based my workings on a scenario not too far removed from my own, with a daily rate of £300 per day and going back for the 6 months of contract presuming 20 days per month.
Would the following calculation be along the right lines? Any comments on where I go wrong would be appreciated?
Step 1: Deduct 5% from your off-payroll income.
20 x 6 x 300 = £36000
36000 x 0.05 – 1800
Total = £34200
Step 2: Add payments directly to the worker (by the client)
0
Step 3: Deduct expenses
As I use my car for site visits this varies depending on how many sites I choose to visit. I can average this out to £700 a month.
£700 x 6 = £4200
So 34200 – 4200 = £30000
Step 4: Deduct Capital allowances
Nice round figure of £500 for tools specific for job.
30000 -500 = £29500
Step 5: Deduct Pension contributions.
0 (I know I know)
Step 6: Deduct Employer NICs
Not sure where I find this
Step 7: Deduct Salary and benefits already paid to the worker
29500 – (£718 x 6) = £25192
Step 8 Deduct Employer NICs on the deemed payment
Again, don’t know where to get this
So would I be taxed on this amount of £25192 (ignoring NICs at the moment)
£25192 – Pers Allow of 12500 = £13192
I’m in Scotland so starter rate of 13192 @19% = £2506
Would this be about right? Seems very low to me.
Considering Corp tax paid as well of usually about 9k per year this doesn’t seem that bad, so I’m obviously missing something out somewhere. As before any dissection would be appreciated. I’m not worried about actual figures, just trying to get my head around what would happen if the dark side go back a few contracts.
cheers
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