LTD or Umbrella - Long story very confused, my own fault and trying to rectify.

mattingley

Hi,

Firstly, apologies for this long message but I'll try to briefly explain my situation as simply as possible. (Also think I posted this in the wrong forums at first but unsure how to change it's board.)

I currently have an accountant that I am paying £144 per month for. This accountant basically covers everything for me submitting my SA, corporation tax etc. I am currently working for myself as a LTD company and to be totally honest I have no idea about accounts/bookkeeping etc. I have always used said accountant for my whole time contracting as LTD to do all my books for me. Over the past year or so their service has become abysmal, but its never been that great anyway. I rarely ask any questions to them because they take a long time to answer and some times don't answer at all. They send me through an email stating I need to pay VAT, SA, whatever it is and I just pay it to the account they specify with my ref code. The final straw for me was when they sent me my most recent VAT return over 2 weeks late but have said its fine and I won't get penalised for it or anything anyway I don't really know the ins and outs of it.

This accountant stems back to the time I initially started contracting under an umbrella company one of my colleagues advised me to use (naïve contractor 19 years old at the time). This company was one of those off shore tax haven type scheme things. Anyway fast forward years pass on it all falls apart (around 2017 I think) and I'm advised to do it this via a LTD company. I was caught up in the offshore scheme thing and it was calculated by HMRC I owed £9,500 for the years I was with that umbrella previously and I have paid this back now as I never intentionally meant to not pay it at the time. Basically that's the reason I'm with this accountant now still, this was the account that I was advised to go along with at the time and I thought I'd stick with them whilst I go through this offshore HMRC bill as they know the ins and outs of how it works and I just want to pay what I owe and move on.

So anyway now I'm quite sure my accountant hasn't been filling in my documents totally correctly most of the time now and I desperately want to find a new account to move this to. My problem is that right now I believe my contract may be INSIDE IR35 and has been for the past 4 years or so (public sector NHS) but during this time I've moved about from different agencies whom have all stated the role is NOT INSIDE IR35 so i've just been doing the usual same thing over the years what the accountant has advised me to do which is
Invoice for the work with VAT
Leave VAT in account then the remained I take away 20% from (for corporation tax)
then from that I deduct my monthly salary + accountant fee, and this left over is what I can pay myself as a dividend.
So each month I pretty much pay myself SALARY + Dividend and left over stays in account. I've been doing this consistently since I started.

I am concerned that if I am breaching IR35 I should be working via an umbrella so I am now posed with the question is there even point me changing accountants at this point if I should be Umbrella? Should I just pack up shop and move to umbrella (although I assume it may already be too late at this point). Should I pay an account a one off to sort my books and close my accounts and move to umbrella?

I'm not totally sure how this IR35 works, is there only an investigation if you are flagged or?

Apologies if this was a bit long winded but a lot has happened over the past few years and I've kind of just buried my head in the sand which was wrong and I'm trying to rectify it now and really not sure where to start at all.  Any help is appreciated.

deedee71

Are you sure you're actually outside right now?  Outside public sector roles are very rare these days.  Ask for a copy of the determination.

If HMRC were to disagree with the determination it would be the end client who would be responsible (I've never heard of this happening).

I've contracted inside, outside, Ltd and umbrella.  It's getting more and more difficult isn't it.

Marcon

mattingley said:

Hi,

Firstly, apologies for this long message but I'll try to briefly explain my situation as simply as possible. (Also think I posted this in the wrong forums at first but unsure how to change it's board.)

I currently have an accountant that I am paying £144 per month for. This accountant basically covers everything for me submitting my SA, corporation tax etc. I am currently working for myself as a LTD company and to be totally honest I have no idea about accounts/bookkeeping etc. I have always used said accountant for my whole time contracting as LTD to do all my books for me. Over the past year or so their service has become abysmal, but its never been that great anyway. I rarely ask any questions to them because they take a long time to answer and some times don't answer at all. They send me through an email stating I need to pay VAT, SA, whatever it is and I just pay it to the account they specify with my ref code. The final straw for me was when they sent me my most recent VAT return over 2 weeks late but have said its fine and I won't get penalised for it or anything anyway I don't really know the ins and outs of it.

This accountant stems back to the time I initially started contracting under an umbrella company one of my colleagues advised me to use (naïve contractor 19 years old at the time). This company was one of those off shore tax haven type scheme things. Anyway fast forward years pass on it all falls apart (around 2017 I think) and I'm advised to do it this via a LTD company. I was caught up in the offshore scheme thing and it was calculated by HMRC I owed £9,500 for the years I was with that umbrella previously and I have paid this back now as I never intentionally meant to not pay it at the time. Basically that's the reason I'm with this accountant now still, this was the account that I was advised to go along with at the time and I thought I'd stick with them whilst I go through this offshore HMRC bill as they know the ins and outs of how it works and I just want to pay what I owe and move on.

So anyway now I'm quite sure my accountant hasn't been filling in my documents totally correctly most of the time now and I desperately want to find a new account to move this to. My problem is that right now I believe my contract may be INSIDE IR35 and has been for the past 4 years or so (public sector NHS) but during this time I've moved about from different agencies whom have all stated the role is NOT INSIDE IR35 so i've just been doing the usual same thing over the years what the accountant has advised me to do which is
Invoice for the work with VAT
Leave VAT in account then the remained I take away 20% from (for corporation tax)
then from that I deduct my monthly salary + accountant fee, and this left over is what I can pay myself as a dividend.
So each month I pretty much pay myself SALARY + Dividend and left over stays in account. I've been doing this consistently since I started.

I am concerned that if I am breaching IR35 I should be working via an umbrella so I am now posed with the question is there even point me changing accountants at this point if I should be Umbrella? Should I just pack up shop and move to umbrella (although I assume it may already be too late at this point). Should I pay an account a one off to sort my books and close my accounts and move to umbrella?

I'm not totally sure how this IR35 works, is there only an investigation if you are flagged or?

Apologies if this was a bit long winded but a lot has happened over the past few years and I've kind of just buried my head in the sand which was wrong and I'm trying to rectify it now and really not sure where to start at all.  Any help is appreciated.

You certainly sound pretty confused, and I suspect posting here may not give you the clear cut answer you're hoping for. An hour with a decent accountant (personal recommendation if possible, otherwise ring round a few and see what they'd charge you for a consultation/check out online reviews) might be a very sensible move. 

isplumm

Look at https://www.tax.service.gov.uk/check-employment-status-for-tax/disclaimer that is the test for whether you are inside / outside IR35 - cannot believe you are outside. Look at this https://forums.contractoruk.com/

Mark

autoeng68

I also suspect that you're inside IR35 (but please check the employment checker in the previous thread). If you are, then there is no point being a Ltd company as you will have to pay the same tax and NI as a standard employee, but will have none of the legal workers benefits (holiday pay, pension etc) as you legally have no employer (see my thread on IR35). 

Nnenne1

Oh dear, my sister is a nurse and also used off shore company. I opened an umbrella company with an account because it was a mine field for her and some colleagues. Don’t Know if it’s allowed, I can give you the accountant’s details, to check  things out for you. 

JohnDorian

People saying OP is/may be inside IR35 need to educate themselves on IR35. In the public sector the IR35 determination is conducted by the client and not the contractor. If his determination is outside then he is outside.

autoeng68

JohnDorian said:

People saying OP is/may be inside IR35 need to educate themselves on IR35. In the public sector the IR35 determination is conducted by the client and not the contractor. If his determination is outside then he is outside.

JohnDorian said:

People saying OP is/may be inside IR35 need to educate themselves on IR35. In the public sector the IR35 determination is conducted by the client and not the contractor. If his determination is outside then he is outside.

As from the 6th April this is also the case in the private sector. The Client determines the IR35 status. In the Automotive industry most of the big companies (Jaguar Landrover etc) have just done a blanket determination and put all roles "inside IR35" (which they are not supposed to do). This will increase the tax on the income of millions of workers something that Rishi Sunak claims he's not doing whilst we are still living under Coronavirus restrictions and is also supposedly a government manifesto pledge!

deedee71

JohnDorian said:

People saying OP is/may be inside IR35 need to educate themselves on IR35. In the public sector the IR35 determination is conducted by the client and not the contractor. If his determination is outside then he is outside.

The OP says he wants to set his mind at rest.  The only way he can do that is to request a copy of the determination.  

JohnDorian

deedee71 said:

JohnDorian said:

People saying OP is/may be inside IR35 need to educate themselves on IR35. In the public sector the IR35 determination is conducted by the client and not the contractor. If his determination is outside then he is outside.

The OP says he wants to set his mind at rest.  The only way he can do that is to request a copy of the determination.  

There is nothing for OP to set his mind to rest to. In the public sector the liability rests with the fee payer. If the fee payer determines outside and it is wrong then that is the fee payers issue. If the fee payer determines inside then the OP just can’t operate in an outside arrangement so no risk there either.