IR35 fine - advice please!

Pennywise

petepetepete wrote: »

Might be worth considering an umbrella company like Giant or Parasol moving forward.

Why?

An umbrella is no better than your own limited even if you're caught by IR35.

With your own co, you have more scope for tax relief on expenses (i.e. computer/phone/internet) and can benefit from the VAT flat rate scheme. You can also have flexibility with IR35-relievable able expenses such as pensions, benefits in kind, etc. The rules are the same for travel and subsistence.

Costs are comparable - monthly fees for an umbrella aren't much different than for a specialist PSC accountant.

directdebiter

I think the point was that IR35 is only relevant if you work through your own Limited Company, if you work through an umbrella company, you dont need to worry about IR35. Although there are better tax benefits through a Ltd Co.

ISWMLE

TheCyclingProgrammer wrote: »

IPSE membership is not an insurance policy.

I was not referring to IPSE membership. I was referring to the insurance for HMRC investigations and tax liabilities. So why were you quoting me when I made no mention of this organisation?

ISWMLE

directdebiter wrote: »

I think the point was that IR35 is only relevant if you work through your own Limited Company, if you work through an umbrella company, you dont need to worry about IR35. Although there are better tax benefits through a Ltd Co.

This is nonsense. You are making IR35 relevant just by working through an umbrella company becuase you are running away from the problem dealing with it, when it is relevant to your work at that time, and you are taxed on all of your income like an employee yet your gross is something you have to negotiate yourself and you have to pay the brolly an admin fee. A dummy whammy. Also, there are no tax benefits working through a limited company if you are inside IR35 except the usual tax deductable allowances the government permits.

A lot of the posts going up on this thread are starting to be highly misleading. I suspect some pro-IPSE stooging going on here. We all know what they are about. My advice is to ignore them. They are have so much damage on the issue of IR35 for those genuinely working outside the IR35 rules.

ISWMLE

petepetepete wrote: »

My understanding is that sadly that's the way it's meant to work. I always used to take out QDOS TLC35 insurance, and while they would do contract reviews as part of it, their insurance usually focussed on actual working practices.

Good luck moving forward, and interesting to hear that they've started doing investigations again. I thought the government had been making noises about essentially stopping enforcing it, but I'm at least a few years out of date.

Might be worth considering an umbrella company like Giant or Parasol moving forward.

Giant were involved in a huge tax avoidance scandal a few years back. Avoid.

quietriot

ISWMLE wrote: »

I suspect some pro-IPSE stooging going on here.

I suspect you are mental.

TheCyclingProgrammer

ISWMLE wrote: »

I was not referring to IPSE membership. I was referring to the insurance for HMRC investigations and tax liabilities. So why were you quoting me when I made no mention of this organisation?

Because you quoted my post about IPSE directly and started talking about insurance policies and seemed to be linking the two.

If you weren't referring to IPSE, why quote my post?

Pennywise

ISWMLE wrote: »

Also, there are no tax benefits working through a limited company if you are inside IR35 except the usual tax deductable allowances the government permits.

Jaw-droppingly nonsense I'm afraid.

What about the few hundred pounds per quarter profit that an average PSC can make from being VAT registered under the flat rate scheme? Not available under an umbrella.

What about telephone, insurance, office costs, equipment purchases, professional fees, that can attract tax relief for corporation tax, otherwise payable on the remaining 5% expense allowance? None of that tax-relievable if working under an umbrella.

What about the company providing "benefits in kind" such as a company car, BUPA, etc., which are allowable expenses (BIK values for deemed payment) under IR35 so can be paid by the company to get tax tax relief. Yes, taxable benefits on the worker, but the tax/nic on the BIK can be substantially less than the IR35 tax/nic if no such expenses meaning more paid under PAYE/NIC via direct payroll/deemed payment.

What about pensions? Massive saving in NIC if the company makes employers' contributions compared to the worker themselves paying pension personally out of "after tax and NIC" income?

What about the worker who's hit the 2year deadline and can't claim travel costs anymore, neither under a ltd nor an umbrella? If he's caught by IR35, the company buying him a car and fuel as BIKs works well as the company claims the costs providing and running the car. Yes, the worker suffers the BIK, but if the travelling costs are high (work along way from home), overall they save money due to tax relief and lower BIK tax/NIC than otherwise having to fund the travel personally out of "after IR35" net pay!

If the 5% allowances aren't fully covered, surplus can be built up in the company (having paid only 20% CT rather than 50/60% plus tax/nic) and either carried forward or paid out as dividends without nic. Scope to build up for several years to be paid out in future years at a lower tax rate.

Plenty of tax planning opportunities available to people caught by IR35 that makes the limited company option worthwhile and a better option than rolling over and accepting using an umbrella instead (or suffering a lack of imagination and not thinking about all the planning opportunities available for a PSC caught by IR35!).

I've had many clients over the years who've been caught by IR35 and made the best of a bad job by adoption of the above, and other, tax planning opportunities, thus saving significant amounts of tax/NIC that would have been lost forever had they used an umbrella or blindly accepted IR35 without these kind of planning techniques being deployed!

chrismac1

If there was a "Post of the year" award on this site, my nomination goes to the last post. My advice to some of the other posters in this thread is that if you are in a hole, it is a good idea to stop digging.

TheCyclingProgrammer

In addition to everything in the excellent post above, it's also worth remembering that just because somebody might be "caught" by IR35 for one contract, it doesn't mean they are caught for all of their contracts and so would be losing out further if they continued to use an umbrella for the sake of one contract.