IR35 & Contractor Loan Schemes

mcc86

Evening,

I'm reading conflicting advise online on the new rules re IR35 for contractors working within the public sector and whether Contractor Loan Schemes is a legit option?

After seeking some quotes, the 100% legit ways of operating as a contractor for a public sector organisation seems to indicate that the take home will be approx. 60-70% now that you are automatically registered as in IR35.

However, despite having read about the Contractor Loan Schemes offering typically 80-84% I am wary of this due to the advice given on the HMRC website. There are however, other websites that warn of the pitfalls of this route too, but it assumes you are not within an Umbrella company.

Does anyone know whether this is a legit route to go down if you are a contractor for a public sector organisation, under an Umbrella company?

Many thanks in advance.

isplumm

Hi

Go and look at http://forums.contractoruk.com/ they are good source for this type of issue.

But my first thoughts are NO - if HMRC are saying stay away then I would.

If you are borrowing / lending money to pay less tax, then be aware that HMRC can / will come after you for tax - any promises made by the organisers of this scheme will be worthless - and YOU will be responsible for any fines / tax owed - NOT them.

So AVOID.

Mark

isplumm

mcc86 wrote: »

Evening,

I'm reading conflicting advise online on the new rules re IR35 for contractors working within the public sector and whether Contractor Loan Schemes is a legit option?

After seeking some quotes, the 100% legit ways of operating as a contractor for a public sector organisation seems to indicate that the take home will be approx. 60-70% now that you are automatically registered as in IR35.

However, despite having read about the Contractor Loan Schemes offering typically 80-84% I am wary of this due to the advice given on the HMRC website. There are however, other websites that warn of the pitfalls of this route too, but it assumes you are not within an Umbrella company.

Does anyone know whether this is a legit route to go down if you are a contractor for a public sector organisation, under an Umbrella company?

Many thanks in advance.

Just had a 2nd second thought on this! You are working for an umbrella company, so I don't see how a Contractor Loan Scheme would work - in reality you are employee of the umbrella company so get PAYE?

Mark

mcc86

Thanks Mark,

I should clarified this is not me personally - I have just asked the question though and you are right, it is not possible to work for an Umbrella company and be part of a Contractors Loan Scheme. The person is currently operating as a limited company and weighing up the various options.

It seems as though the Umbrella company is the only legit way forward? Will definitely have a look at the link you kindly provided - looks like a useful source of knowledge!

isplumm

Hi

You can still work through your own LTD company - but you will be inside IR35. Advise them to look at the website I mentioned - or get out of the public sector contracting.

Mark

TheCyclingProgrammer

Even though it may turn out to be the case in practice, the rule changes in April do NOT mean contractor working in the public sector is automatically inside. The major difference is that the client or agency is now responsible for determining your status.

Depending of the effectiveness of the IR35 tool that HMRC are working on it may still be possible to work for the public sector outside IR35 though it remains to be seen how clients approach this.

TheCyclingProgrammer

Oh and stay away from dodgy loan schemes unless you want the stress of a tax investigation further down the line.

chrismac1

This whole thing is a classic example of the HMRC Numpty Department in action. By definition hitting the public sector for extra tax is a zero sum game overall for the deficit. What HMRC gains another part of the public sector loses out on.

But the impact so far is very far from a zero sum game. It has resulted in extra recruitment costs already for the public sector locally, due to having to replace the contractors who have left. Further down the line there are bound to be extra costs as the new staff are in general less seasoned and replacing in general very qualified and experienced folks who have voted with their feet, being the most marketable people best able to find other work quickly.

Predictably stupid HMRC staff delivering predictable results for the public sector finances.

MataNui

It seems most public sector bodies have taken the view that they simply cant be bothered to correctly determine the IR35 state of the contractors so are going to simply blanket report them all as in IR35. Typical public sector idiocy.

Its basically a zero sum game with HMRC and the public sector. HMRC think they will get more tax (presumably for the government to spend on the public sector) yet this move is going to cost the public sector billions in increased rates and the fact that they will now likely be liable for holiday pay etc. Additionally they will probably find a good number of contractors either not renewing or simply walking from current contracts as its going to be financial suicide to suddenly be declared as inside IR35 when you have previously declared the contract to be outside.