Yet another Limited inside IR35 vs Umbrella thread Yet another Limited inside IR35 vs Umbrella thread - Page 2
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  1. #11

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    Quote Originally Posted by Amanensia View Post
    Exactly this.
    And exactly why there is a law against it...

    If anyone does get caught like this, they should consider taking the umbrella to court. That's because the umbrella is supposed to bill the agency (and indirectly the client) at a rate that covers the NICs/Levy overhead, so it never goes near the worker's income. the worker s onluy liable for PAYE and EeNICs, even after next April.

    If you're offered a new contract that represents a drop in income to cover the client's costs then you should have an interesting discussion...
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    End clients putting people through umbrellas will be looking in most cases to pay exactly what they are paying now. If this can only be achieved by lowering the headline rate that is advertised to the worker (in order to leave enough headroom for the agency to cover ERNI) then that's what will happen. There's no law against clients lowering rates (obviously as long as it doesn't result in rates dropping below minimum wage.)

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    Quote Originally Posted by malvolio View Post
    And exactly why there is a law against it...

    If anyone does get caught like this, they should consider taking the umbrella to court. That's because the umbrella is supposed to bill the agency (and indirectly the client) at a rate that covers the NICs/Levy overhead, so it never goes near the worker's income. the worker s onluy liable for PAYE and EeNICs, even after next April.

    If you're offered a new contract that represents a drop in income to cover the client's costs then you should have an interesting discussion...
    Not going to happen Al


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    Quote Originally Posted by GhostofTarbera View Post
    Not going to happen Al


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    Of course it isn't. Too many sheep...
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    Quote Originally Posted by Snooky View Post
    This would certainly be true if, post April, the client or agency swallowed the cost of the extra employers NI etc, but I'm fairly certain this is not going to happen in most cases. The client will not pay higher rates just because of a tax change which affects the contractor unless that contractor is completely irreplaceable or brings incredible value to the business.

    So the agency will still receive exactly the same gross rate from the client as before and they will rework the contract so that the rate the contractor receives is net of those PAYE deductions.

    IMHO of course.
    Hi Snooky,

    It depends if the client thinks the temp resource is valuable enough. If they are, we will see clients raising rates to ensure experts and specialists stay put.

    If clients can raise umbrella rates for AWR, they can definitely raise rates for this.

    Thanks


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    Quote Originally Posted by Amanensia View Post
    End clients putting people through umbrellas will be looking in most cases to pay exactly what they are paying now. If this can only be achieved by lowering the headline rate that is advertised to the worker (in order to leave enough headroom for the agency to cover ERNI) then that's what will happen. There's no law against clients lowering rates (obviously as long as it doesn't result in rates dropping below minimum wage.)
    You're on £500 a day. Suddenly, with no other changes, including in the work you're doing, that contract is binned and you're offered one on £450 a day. How easy will it be for the client to defend that as not being related to their picking up an extra 22% or so in tax liabilities that don't belong to the worker?
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    Quote Originally Posted by malvolio View Post
    You're on £500 a day. Suddenly, with no other changes, including in the work you're doing, that contract is binned and you're offered one on £450 a day. How easy will it be for the client to defend that as not being related to their picking up an extra 22% or so in tax liabilities that don't belong to the worker?
    It will be impossible to defend in the manner you ask, but that won't stop it happening!

    I am most certainly not a lawyer but I understand from what you and others have said over the past few months that, in theory, the rate advertised to the worker should be the rate net of ERNI. Clearly in the first instance that's not going to happen - it appears that many of the banks that are shuttling everyone into Umbrellas are currently telling their contractors that there won't be a rate change.

    We may see some backtracking on that definition before April, as reputable Umbrellas pick up these people and the message starts getting back to the banks that unless they change (reduce!) their headline rates then the Umbrellas are going to be billing them rather more than they expected. But ultimately I would be very surprised indeed if the ERNI costs end up being picked up by the banks. That's absolutely not the message that's being put out there.

    Incidentally all the Umbrella calculators out there interpret the rate you input as the total gross rate, including everything other than VAT. So, if it's really the case that headline rates should be net of ERNI (and I don't doubt you), then it doesn't appear to be standard market practice...
    Last edited by Amanensia; 18th November 2019 at 15:18.

  8. #18

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    Quote Originally Posted by Amanensia View Post
    It will be impossible to defend in the manner you ask, but that won't stop it happening!

    I am most certainly not a lawyer but I understand from what you and others have said over the past few months that, in theory, the rate advertised to the worker should be the rate net of ERNI. Clearly in the first instance that's not going to happen - it appears that many of the banks that are shuttling everyone into Umbrellas are currently telling their contractors that there won't be a rate change.

    We may see some backtracking on that definition before April, as reputable Umbrellas pick up these people and the message starts getting back to the banks that unless they change (reduce!) their headline rates then the Umbrellas are going to be billing them rather more than they expected. But ultimately I would be very surprised indeed if the ERNI costs end up being picked up by the banks. That's absolutely not the message that's being put out there.

    Incidentally all the Umbrella calculators out there interpret the rate you input as the total gross rate, including everything other than VAT. So, if it's really the case that headline rates should be net of ERNI (and I don't doubt you), then it doesn't appear to be standard market practice...
    The rate advertised to the contractor inside IR35 l must be net of ERNICs and App. Levy. That is the law(Chapter 10 of IETPA to be a little more specific). It's being ignored because nobody is challenging it. Like I said - too many sheep.
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  9. #19

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    Quote Originally Posted by malvolio View Post
    The rate advertised to the contractor inside IR35 l must be net of ERNICs and App. Levy. That is the law(Chapter 10 of IETPA to be a little more specific). It's being ignored because nobody is challenging it. Like I said - too many sheep.
    I thought I had seen that somewhere and was trying to find the specific text. Essentially the rate you are quoted should be on the same basis as what would be quoted to an employee.

    The only difference is that the fee payer pays the levy and employers NI, not the end client. Only income tax and employees NI should be deducted from the rate quoted.

    This is the key difference from the current umbrella model and the unwary need to make sure they don't get caught out.

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    Quote Originally Posted by ladymuck View Post
    I thought I had seen that somewhere and was trying to find the specific text. Essentially the rate you are quoted should be on the same basis as what would be quoted to an employee.

    The only difference is that the fee payer pays the levy and employers NI, not the end client. Only income tax and employees NI should be deducted from the rate quoted.
    So clearly the ERNI and apprenticeship levy must be billed additionally to the end client (as the Umbrella margin won't even come close to covering it.) It'll be interesting to see what happens when the penny drops because this is absolutely not what the banks are expecting. You'd think their armies of employment lawyers would have seen this coming a mile off...

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