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    Default Deemed payments

    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

  2. #2

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    Quote Originally Posted by Blert596 View Post
    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
    the 5% allowance has been removed and expenses will not be allowed for those deemed caught by IR35. Also, you will not be able to reduce your tax liability by having pension payments deducted prior to taxes being calculated.

  3. #3

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    Quote Originally Posted by JohntheBike View Post
    the 5% allowance has been removed and expenses will not be allowed for those deemed caught by IR35. Also, you will not be able to reduce your tax liability by having pension payments deducted prior to taxes being calculated.
    Regular travel to the same location on a daily basis cannot be deducted. Travel to temporary work places, such as site visits described in this thread, would be valid expenses that can be reclaimed.
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    Quote Originally Posted by DeludedKitten View Post
    Regular travel to the same location on a daily basis cannot be deducted. Travel to temporary work places, such as site visits described in this thread, would be valid expenses that can be reclaimed.
    Yeah, I go to up to 4 unmanned sites a day for tech upgrade visits, and I determine the schedule to suit me and just tell the design guys to turn up then. I can be out all 5 days a week or as little as one depending on how I want to progress the paperwork that cant be done on site.

    I use my own car and the client doesn't reimburse me for mileage and I just claim it at the 45/25 rate. The permies have company cars.

    I don't claim travel to and from work as I have been in the same location for over 2 years, although I had 3 months away working for another client (based at home) before returning to the previous client.

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    Quote Originally Posted by JohntheBike View Post
    the 5% allowance has been removed and expenses will not be allowed for those deemed caught by IR35. Also, you will not be able to reduce your tax liability by having pension payments deducted prior to taxes being calculated.
    And yet both of those things are on the HMRC page that takes you through your deemed payment.

    The expenses are for travelling to and from sites to carry out work and not a place of work.

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    Quote Originally Posted by Blert596 View Post
    I don't claim travel to and from work as I have been in the same location for over 2 years, although I had 3 months away working for another client (based at home) before returning to the previous client.
    I think you know this but that three months doesn't really help anything. You've still been there over 40% of your time over a rolling period. Three months isn't enough to make any difference to the rule.
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    Quote Originally Posted by northernladuk View Post
    I think you know this but that three months doesn't really help anything. You've still been there over 40% of your time over a rolling period. Three months isn't enough to make any difference to the rule.
    Yeah, I haven't claimed since I found out I was going to break the initial 2 year period, and realise I haven't been away for long enough. One question I've never asked really is can I claim for parking over this new time if I'm not allowed to use the permies parking spots so am forced to park off site when I do go to the office?

  8. #8

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    I'd say no. It's still part of your travel costs and the location is now permanent so would think it wouldn't be allowed. Not had this question before that I can recall to be fair.
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    Quote Originally Posted by Blert596 View Post

    The expenses are for travelling to and from sites to carry out work and not a place of work.
    That is a very difficult statement.

    In theory your "normal place of work" should be easy to determine. In practice, roles that require attendance at different places create a raft of problems.

    It's entirely possible for example that if you worked at place A on Monday, place B on Tuesday, place C on Wednesday etc, then each of those places are a "normal place of work" and the costs of travelling there and back from home, are not tax deductible.

    If you go to place A and then to place B and then back home, travel home to A and B to home is also not tax deductible.
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    Quote Originally Posted by webberg View Post
    That is a very difficult statement.

    In theory your "normal place of work" should be easy to determine. In practice, roles that require attendance at different places create a raft of problems.

    It's entirely possible for example that if you worked at place A on Monday, place B on Tuesday, place C on Wednesday etc, then each of those places are a "normal place of work" and the costs of travelling there and back from home, are not tax deductible.

    If you go to place A and then to place B and then back home, travel home to A and B to home is also not tax deductible.
    Thanks..you've just increased my anxiety levels no end.

    The way this works is I'm given a list of sites to do technical surveys on. I get the sites which are scattered all over Scotland, work out a schedule to attend them, and arrange with other subcontractors to meet on the sites at a certain time. I am usually on site for a max of 2 hours per site A before moving on to site B or C . The amount of sites per day will depend on various things like weather, current workload, travel time, and work required at the individual site. I have approximately 400 sites that are mine to deliver upgrades on.

    I normally drive to site from home as going into the clients site is pointless and not required, and sometimes return straight home and write up the work done, or go into the clients office to provide an update and input data. There's no requirement for me to go to the clients office after visiting the sites. Unless something goes wrong I'd rarely revisit a site, and the only work I do on site is related to that specific site.

    Depending on the amount of sites that need looking at I may work totally from my home or go into the office depending on how I feel basically.

    I honestly don't see how that could be construed as travelling to a fixed place of work.

    I dont claim mileage to and from the clients office when I do go in.

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