I am a contractor and need to know what to do about - IR35

BabyBetty

Hi,

I need some advice on what to do about IR35 when I will be affected in April 2017

I am a contractor and work through a limited company. The agency that I get my work through has contacted me to inform me about IR35 and that I will be affected from 6 April 2017. They want me to let them know what I want to do about being paid which could include them deducting tax and national insurance or being paid via an umbrella company.

Can anyone shed a light on whether they are in the same position and what they have decided to do?

Any other advice would be welcomed.

Thanks

BB

patman99

As you work through your own limited company I doubt it will have much effect on you as you are classed as an employee of the limited company.

Speak with your accountant. At a guess, he will tell you that the agency is trying to scare you into switching to it's 'favoured' umbrella company so it can get a little backhander from them.

MidLifeMayhem

Hi BB, I'm assuming like me you're working in a public sector organisation.

Things are vague at the moment but my understanding is the pso is now responsible for making the decision on whether you are in or out of IR35. Has this been confirmed to your agency?

The one I'm in is "working on it" but have told me/the agency nothing so far.

The bottom line appears to be they will have to up contractor day rates by 25-30% for the contractor to earn the same under PAYE. Or certify that the contractor is out of IR35. Or witness a mass exodus of contractor labour.

The Government keeps saying the rules are to ensure we pay tax and we should be no worse off, but under PAYE and top tax bracket, I'll be paying 4 times more income tax than I currently do in corporation tax and income tax combined.

Personally I'm worried sick. I'd have to stop paying into my pension and my income would still be £500 a month down.

Hopefully the pso's will see sense and build strong cases for their contractors to be outwith IR35.

I read TfL initially said they were enforcing a blanket ban on IR35 but had to do a u-turn when their contractors responded en masse by saying they would leave.

I think we all have to stand firm.

agrinnall

Pay the tax, that's what I did when I was contracting at the time IR35 was introduced and we all thought it was going to be enforced. As it turns out, it wasn't, but if the assumption that your client is in the public sector then I believe that you will be required to be IR35 compliant, which basically means paying out all of your company profit through PAYE with no dividends. But I don't see why the agency should be making any deductions, that's for your limited company to do.

MidLifeMayhem

agrinnall wrote: »

Pay the tax, that's what I did when I was contracting at the time IR35 was introduced and we all thought it was going to be enforced. As it turns out, it wasn't, but if the assumption that your client is in the public sector then I believe that you will be required to be IR35 compliant, which basically means paying out all of your company profit through PAYE with no dividends. But I don't see why the agency should be making any deductions, that's for your limited company to do.

The new rules mean the agency must deduct tax and NI before the payment is made to the limited company. The Government says this is the only way the PSO can be assured that contractors are paying their taxes.

Gavin83

MidLifeMayhem wrote: »

The Government keeps saying the rules are to ensure we pay tax and we should be no worse off, but under PAYE and top tax bracket, I'll be paying 4 times more income tax than I currently do in corporation tax and income tax combined.

I'm not really sure you have a complaint as you are effectively avoiding paying tax. Legally of course but it appears they're cracking down and closing the loopholes. Seems a fair solution IMO. I'm sure you'll still be earning a decent wage.

I do know a lot of contractors and most are planning on working for someone else but it is hard to have sympathy when they're paying a fraction of the tax they should be.

unforeseen

MidLifeMayhem wrote: »

The new rules mean the agency must deduct tax and NI before the payment is made to the limited company. The Government says this is the only way the PSO can be assured that contractors are paying their taxes.

In which case I am sure that the contractor could claim that they are an employee of the PSO and should have all the perks that go with it.

Reading http://www.contractoruk.com/news/0012861transport_london_bans_limited_companies_ahead_ir35_change.html this is going to be one big clusteref**k.

agrinnall

MidLifeMayhem wrote: »

The new rules mean the agency must deduct tax and NI before the payment is made to the limited company. The Government says this is the only way the PSO can be assured that contractors are paying their taxes.

Ah, I didn't realise that, in which case it does sound like the OP has to choose between keeping the limited company and allowing the agency to make deductions or ditch the limited company and go with an umbrella company.

unforeseen

How can the agency y deduct the right amount of tax? There could be mileage payments, accommodation costs or a number of other non-taxable expenses to take into account. They will need all the information an employer would require such as pension contributions etc

Pennywise

unforeseen wrote: »

How can the agency y deduct the right amount of tax? There could be mileage payments, accommodation costs or a number of other non-taxable expenses to take into account. They will need all the information an employer would require such as pension contributions etc

Travel and subsistence costs were stopped from being an allowable expense last April for those caught under IR35.

unforeseen

It is interesting that Tfl have declared ALL contracts, with the exception of a few critical roles, to be inside IR35.

Most companies have contracts with agencies that are the same across the board so how can 'critical' roles with the same contract conditions as others suddenly fall outside?.