Outside IR35 or Inside IR35

Ronak_Dave

Hi Everyone,

Currently, I am working for government body where my contract is outside IR35. Now I got one new opportunity different government client, where they identify contract is inside IR35. Is there any issue implication which I should aware of for future? Any advice, please.

motorguy

Ronak_Dave wrote: »

Hi Everyone,

Currently, I am working for government body where my contract is outside IR35. Now I got one new opportunity different government client, where they identify contract is inside IR35. Is there any issue implication which I should aware of for future? Any advice, please.

In what context? Do you mean is there an issue moving from outside to in on your next contract, and then perhaps moving to an outside

OR do you mean, whats the implications of being inside IR35 (of which there are many)

Ronak_Dave

motorguy wrote: »

In what context? Do you mean is there an issue moving from outside to in on your next contract, and then perhaps moving to an outside

OR do you mean, whats the implications of being inside IR35 (of which there are many)

Yes moving from outside IR35 contract to new inside IR35 contract.

isplumm

Well I would have thought the biggest issue is the money - the company will take off your tax at source - so I suspect you will be in the 40% bracket - you will also not be able to claim back expenses, as you are now a employee of the agency (I think)

So basically you will end up far more tax, but with no benefits eg. holiday / sick pay / pension.

A lot of contractors have asked for a 20% uplift in rates to cover the extra tax.

Have a look at http://forums.contractoruk.com/ for more info.

Mark

dlmcr

you don't say if you working through a limited company or an umbrella but if limited company and you are going inside ir35 then you will need to close your company and work through an umbrella.
make sure that when you start your inside role you are on a much higher rate then before (expenses, tax, emp ni etc)
is the new contract and working practices the same or very different on these 2 contracts? if you get investigated by hmrc and the working practices on both contracts are broadly similar they may ask some searching questions around whether it was correct that you were outside previously when you are now in (retrospective taxation)
try QDOS and get ir35 insurance could also be considered.
look at contractor uk forum for more info, they have a public sector contracting part.

motorguy

dlmcr wrote: »

you don't say if you working through a limited company or an umbrella but if limited company and you are going inside ir35 then you will need to close your company and work through an umbrella.

No you dont. I would be keeping it functioning as chances are his next contract will be outside of IR35.

motorguy

isplumm wrote: »

Well I would have thought the biggest issue is the money - the company will take off your tax at source - so I suspect you will be in the 40% bracket - you will also not be able to claim back expenses, as you are now a employee of the agency (I think)

So basically you will end up far more tax, but with no benefits eg. holiday / sick pay / pension.

A lot of contractors have asked for a 20% uplift in rates to cover the extra tax.

Have a look at http://forums.contractoruk.com/ for more info.

Mark

It can be an awful lot worse than that if you're not careful.

If you're inside IR35 then the employer has the responsibility to pay Employers national insurance, apprenticeship levy and to pay you annual leave. The two former amount to maybe 15% for talks sake.

You have, as you've said, the responsibility to pay tax at source - moreoften done through an umbrella company, and increased national insurance contributions.

If the employer is paying a particular rate, then that will be passed to an umbrella company who will deduct

• Employers National insurance
• Apprenticeship levy
• Employees National insurance
• Employees PAYE
• A percentage to allow for the 2.2 days A/L you are entitled to.
• Their fee for managing this for you (usually a weekly amount)

Granted, you will then get paid holidays, accruing at 2.2 days per month, but they'll be using your own money to do so.

Also as you've said, you wont be able to claim tax allowance on your expenses.

I would say if you're getting £400 a day outside of IR35, you'd need to be getting £550-600 a day inside IR35 to cover all of the above.

motorguy

isplumm wrote: »

Well I would have thought the biggest issue is the money - the company will take off your tax at source - so I suspect you will be in the 40% bracket - you will also not be able to claim back expenses, as you are now a employee of the agency (I think)

So basically you will end up far more tax, but with no benefits eg. holiday / sick pay / pension.

A lot of contractors have asked for a 20% uplift in rates to cover the extra tax.

Have a look at http://forums.contractoruk.com/ for more info.

Mark

A 20% uplift wont even begin to cover it...

isplumm

motorguy wrote: »

A 20% uplift wont even begin to cover it...

Hi

I have never worked in the public sector as a contractor, so it is only what I have read on the contractor forums - so I am sure you are correct.

I believe that the Govt (whoever it is) will try & introduce the same regime into the private sector - so after 12 years a contractor I made the decision to walk away from contracting!:mad:

Mark

isplumm

motorguy wrote: »

No you dont. I would be keeping it functioning as chances are his next contract will be outside of IR35.

Not if he stays in public sector - for an easy life, I can see all public sector bodies saying all contractors are inside IR35, so unless OP is going to jump into private sector work, I am not sure I see point of keeping company running.

Mark

antrobus

Ronak_Dave wrote: »

Hi Everyone,

Currently, I am working for government body where my contract is outside IR35. Now I got one new opportunity different government client, where they identify contract is inside IR35. Is there any issue implication which I should aware of for future? Any advice, please.

Read this;

Off-payroll working in the public sector
https://www.gov.uk/guidance/off-payroll-working-in-the-public-sector-reform-of-intermediaries-legislation

Basically;

From 6 April 2017 there are changes to the way the current intermediaries legislation (known as IR35) is applied to off-payroll working in the public sector. Where the rules apply, people who work in the public sector through an intermediary will pay employment taxes in a similar way to employees.