Company position when deemed inside IR35 Company position when deemed inside IR35
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  1. #1

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    Default Company position when deemed inside IR35

    from Accounting legal -

    an issue that doesn't seem to be very clear is who should the funds be paid to. If they are paid to the contractor company then clearly the company must be maintained and incur a loss in doing so. So all the debate about whether or not the company should be wound up is irrelevant, as it can't be.

    So, could or should the monies be paid directly to the contractor as they are already nett of taxes, thus bypassing the company?

    The problem as I see it there, is that the contract will be between the contractor's company and the agency/client assuming that the contractor doesn't take an FTC or uses an umbrella, and so the agency/client would not want to pay the monies direct to an individual. So what does the panel think?

  2. #2

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    Quote Originally Posted by JohntheBike View Post
    from Accounting legal -

    an issue that doesn't seem to be very clear is who should the funds be paid to. If they are paid to the contractor company then clearly the company must be maintained and incur a loss in doing so. So all the debate about whether or not the company should be wound up is irrelevant, as it can't be.

    So, could or should the monies be paid directly to the contractor as they are already nett of taxes, thus bypassing the company?

    The problem as I see it there, is that the contract will be between the contractor's company and the agency/client assuming that the contractor doesn't take an FTC or uses an umbrella, and so the agency/client would not want to pay the monies direct to an individual. So what does the panel think?
    Generally speaking, contractors will have three options if an assignment is deemed to be inside IR35 by their End Hirer from April 2020.

    Go permie - in which case you could either leave the company in an inactive state while you work out if this is a long-term solution or whether you are likely to return to contracting in an outside IR35 role once the dust has settled and we can all see what the new landscape looks like. Under this option, remuneration would be made directly to the individual.

    Go umbrella - same as above really but not employed directly by the End Hirer.

    Operate through the limited company in an inside IR35 capacity. Under this option any remuneration would be made to the PSC, which would likely operate at a loss (unless there are other contracts being fulfilled in outside IR35 engagements).

    You could consider closing the PSC would be a consideration under the first two options but I would advise caution. It may be better to hold on to the PSC for a time while you explore your options and, if you're unlikely to return to contingent working, then you could close your company.

  3. #3

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    Correct me if i am wrong but if you operate via the limited company you can claim the 5% expenses rule. Which effectively gives you 5% tax free gross to be used against employers NI and deemed salary. Therefore there is a small advantage in using your limited company.

  4. #4

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    Quote Originally Posted by creativity View Post
    Correct me if i am wrong but if you operate via the limited company you can claim the 5% expenses rule. Which effectively gives you 5% tax free gross to be used against employers NI and deemed salary. Therefore there is a small advantage in using your limited company.
    Happy to correct you as being wrong.

    That's gone in the draft legislation, which applies to medium/large clients, as it went in the PS rules before. It will remain for small clients.

  5. #5

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    Quote Originally Posted by jamesbrown View Post
    Happy to correct you as being wrong.

    That's gone in the draft legislation, which applies to medium/large clients, as it went in the PS rules before. It will remain for small clients.
    Wow things just keep getting worse. A few of us who are currently outside are key to a project success and as such will be requesting an outside determination, if not we walk. Let's see how that pans out...
    Thing is we are clearly outside but they are threatening with blanket inside, which really doesnt apply to us.
    These lazy determinations and lazy administrators are in for a shock and will do the industry no good whatsoever. Especially for companies who are away from urban areas.

  6. #6

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    Entropy is NOT what it used to be.
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  7. #7

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    Quote Originally Posted by creativity View Post
    Wow things just keep getting worse. A few of us who are currently outside are key to a project success and as such will be requesting an outside determination, if not we walk. Let's see how that pans out...
    Thing is we are clearly outside but they are threatening with blanket inside, which really doesnt apply to us.
    These lazy determinations and lazy administrators are in for a shock and will do the industry no good whatsoever. Especially for companies who are away from urban areas.
    Yeah, it sucks, but you're not likely to turn around the tanker that is big company risk/compliance; the decision will be way above hiring managers who are probably tearing their hair out already (or will be).

    But are you sure you're going to get an IR35 status determination/SDS? What's far more likely is that they will eliminate contractors altogether or require you use an umbrella. Both are perfectly fine policy decisions that don't create risk for them by asserting IR35 status, other than the risk you note ("we walk"). Frankly, they are likely prepared for you to walk but probably expect you or someone like you to return before long, because you need to eat...

  8. #8

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    Indeed you are right and that's how it'll likely pan out.
    They aren't a very large company (400 employees) and was hoping for something more personal from them.
    The company is in a rural area so will find it difficult to compete with urban companies, afteral that's where the majority of people live and if there are two gigs who would choose to travel 80 miles some days when they can do so for 20 at the same rate?

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