Outside IR35 or Inside IR35

motorguy

isplumm wrote: »

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

If he has any sense he'll do what most of the contractor market is doing and look for private sector work if he can.

Taking a blanket approach to IR35 and deeming all contractors in is something HMRC have a dim view of. There are public sector bodies already issuing outside IR35 contracts.

I can only see this increasing once the realisation hits of the financial impact to them.

I wouldnt be knee jerking in to closing down a ltd company on the back of one inside IR35 contract.

motorguy

isplumm wrote: »

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

Sadly I know from experience....

Yes, it'll come to the private sector, however i dont think the private sector will take it lying down like the public sector has (to a greater extent). If the contract is genuinely outside of IR35 then companies need not be afraid of deeming it outside IR35.

If you've been at it 12 years i'm sure you've your pockets well lined!!

Ronak_Dave

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

Thank you, for your response. I already ask for 20% uplift in rates which I believe should cover the extra tax. I am more worries about current contract which is outside IR35. Is there any implecation where HMRC come back and said new contract is inside IR35 how come (current) roll indentify outside IR35? and ask to pay extra tax for the current contract.

Ronak_Dave

motorguy wrote: »

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.

Thank you, for your response. I already ask for 20% uplift in rates which I believe should cover the extra tax. I am more worries about current contract which is outside IR35. Is there any implecation where HMRC come back and said new contract is inside IR35 how come (current) roll indentify outside IR35? and ask to pay extra tax for the current contract.

Ronak_Dave

motorguy wrote: »

If he has any sense he'll do what most of the contractor market is doing and look for private sector work if he can.

Taking a blanket approach to IR35 and deeming all contractors in is something HMRC have a dim view of. There are public sector bodies already issuing outside IR35 contracts.

I can only see this increasing once the realisation hits of the financial impact to them.

I wouldn't be knee jerking in to closing down an LTD company on the back of one inside the IR35 contract.

Yes Paul, that exactly what I will do next. I will look for private sector work.

motorguy

Ronak_Dave wrote: »

Thank you, for your response. I already ask for 20% uplift in rates which I believe should cover the extra tax. I am more worries about current contract which is outside IR35. Is there any implecation where HMRC come back and said new contract is inside IR35 how come (current) roll indentify outside IR35? and ask to pay extra tax for the current contract.

When you say "new contract" - is it a further extension of your current role or a completely new job role and title?

If its a further extension of a current role but now deemed inside IR35 then yes, you run the risk of HMRC querying it at a later date.

Nobody knows what level of risk that could be. In theory HMRC dont have the resources and their aim is to get people inside IR35, but likewise retrospectively checking could be relatively easy pickings....

A 20% uplift will still be quite short of what it will cost you extra within IR35. Also, check is that 20% extra for you or 20% extra from which the umbrella company will fund the Emloyers NI contribution, apprentriceship levy and your annual leave entitlement, after which you will still have to fund your own PAYE tax and NI at a much higher rate.

Ronak_Dave

motorguy wrote: »

When you say "new contract" - is it a further extension of your current role or a completely new job role and title?

If its a further extension of a current role but now deemed inside IR35 then yes, you run the risk of HMRC querying it at a later date.

Nobody knows what level of risk that could be. In theory HMRC dont have the resources and their aim is to get people inside IR35, but likewise retrospectively checking could be relatively easy pickings....

A 20% uplift will still be quite short of what it will cost you extra within IR35. Also, check is that 20% extra for you or 20% extra from which the umbrella company will fund the Emloyers NI contribution, apprentriceship levy and your annual leave entitlement, after which you will still have to fund your own PAYE tax and NI at a much higher rate.

Hi Paul,

New roll with new contract in different goverment body. True I just calculated even 20 to 25% extra not cover the cost. Now I will be looking in private sector and will just say no no to goverment body if contract inside IR35. Thank you, Ronak

Ronak_Dave

Thank you everyone for your great response.