Urgent advice needed – Sole Trader needing to choose between PAYE or Umbrella

shoe_dog

I've been operating as a Sole Trader for 7 years, i'm supposed to be starting a new short-term 3 week contract on Monday for a company that uses that use an external workforce management platform called Worksome to handle payments. I’ve been asked to sign myself up to the Worksome platform today (booking was only agreed yesterday) and have encountered this message during the sign up process:

When taking jobs where you might be regarded as an Agency Worker, you cannot be contracted through your sole trader business. You can optionally be paid as PAYE from Worksome or use an umbrella service.

I'm familiar with the recent IR35 changes but my question is which option – PAYE or Umbrella – would be best for me in terms of least hassle and minimum costs involved? 

I reached out to my accountant but they're away on hols till 24th and i need to get this sorted today otherwise the company can't issue a contract and the booking might fall through. 

Any advice would be great. 

DullGreyGuy

For the sake of 3 weeks its not going to make much difference. An umbrella is also PAYE the only difference being were you to switch to another job via PAYE/Umbrella then you could keep the same umbrella and so have a longer continuous employment.

To ensure no one is pulling a fast one just ensure you understand the rates and the deductibles... umbrella is normally uplifted to cover the Employers NI but given this entity isnt the hiring firm or agency either than potentially they'll also be deducting employers NI

DE_612183

for three weeks I'd do umbrella - but check to see what their fees are - could be £100 a month and no pro-rata...

DullGreyGuy

DE_612183 said:

for three weeks I'd do umbrella - but check to see what their fees are - could be £100 a month and no pro-rata...

Enough do weekly fees if pay is weekly

shoe_dog

My accountant's colleague got back to me and advised PAYE via Worksome. According to Worksome's FAQ's they don't charge a fee (like umbrella services do) but do mention potential Employers NI and Apprenticeship Levy deductions of 14.3% from my charge rate (pasted below).

Therefore would increasing my charge rate by 14.3% cover me in this instance or is this unfair given i would normally be paying Class 4 NI contributions anyway if this was a normal booking where i invoice the client directly? I.e. should i only increase my rates by the difference in NI rather than the full 13.8%?

————————

What will my deductions be when on PAYE?

If you choose to use our PAYE service for your contract, this means we would be responsible for deducting employment taxes & NI contributions on your payments - the standard tax brackets for your employee deductions can be found on HMRC's website.

Depending on your client, we may need to deduct further employer costs of 14.3% from your Charge Rate. This calculates as the Employers NI at 13.8% and Apprenticeship Levy (AL) at 0.5% and would in effect reduce your Booking Fee. These standard PAYE deductions, as per HMRC, are the same deductions you would incur with any Umbrella company.

https://help.worksome.dk/en/articles/5144049-using-worksome-s-paye-service#h_439816079a

Marcon

shoe_dog said:

My accountant's colleague got back to me and advised PAYE via Worksome. According to Worksome's FAQ's they don't charge a fee (like umbrella services do) but do mention potential Employers NI and Apprenticeship Levy deductions of 14.3% from my charge rate (pasted below).

Therefore would increasing my charge rate by 14.3% cover me in this instance or is this unfair given i would normally be paying Class 4 NI contributions anyway if this was a normal booking where i invoice the client directly? I.e. should i only increase my rates by the difference in NI rather than the full 13.8%?

Are you sure you're going to get an option to do either? It would be extremely unusual to agree a booking without a fee being part of that agreement from the outset.

DullGreyGuy

Assuming you arent close to NMW then there is little about "fairness" about it... they are offering £X for the job via engagement models A or B

You normally operate via C but its up to you to device if the net of A or B is going to be sufficient for your needs or you'd rather win work elsewhere where you can continue to use C. 

I operate via a PSC but  get approached about insider IR35 roles, many roles they havent adjusted the day rate so would be a notable hit, a tiny amount have significantly uplifted the dayrate to compensate and try attract people from PSC model and a moderate amount are somewhere between the two so both you and they are taking a hit. 

I mean you could go back and try and renegotiate a higher rate but presumably you've already tried to get the maximum rate you can and so its a bit pointless

shoe_dog

I've managed to sort it, the hiring company have confirmed the contract is outside of IR35 and produce an SDS to this effect so there's no need to use a PAYE service after all. 

DullGreyGuy

shoe_dog said:

I've managed to sort it, the hiring company have confirmed the contract is outside of IR35 and produce an SDS to this effect so there's no need to use a PAYE service after all. 

IR35 is irrelevant as you are a sole trader and it only applies to people like me who uses a PSC

Grumpy_chap

DullGreyGuy said:

shoe_dog said:

I've managed to sort it, the hiring company have confirmed the contract is outside of IR35 and produce an SDS to this effect so there's no need to use a PAYE service after all. 

IR35 is irrelevant as you are a sole trader and it only applies to people like me who uses a PSC

Yes and no.  It was clear this was an IR35 related matter and seems like the hiring company are not fully familiar with the details.  Good for the OP that the hiring company now did that SDS and the outcome is the correct one, allowing the OP to work as a genuine contractor.

DullGreyGuy

Grumpy_chap said:

DullGreyGuy said:

shoe_dog said:

I've managed to sort it, the hiring company have confirmed the contract is outside of IR35 and produce an SDS to this effect so there's no need to use a PAYE service after all. 

IR35 is irrelevant as you are a sole trader and it only applies to people like me who uses a PSC

Yes and no.  It was clear this was an IR35 related matter and seems like the hiring company are not fully familiar with the details.  Good for the OP that the hiring company now did that SDS and the outcome is the correct one, allowing the OP to work as a genuine contractor.

No and no... IR35 has no issues with self employed contractors. A determination can be done, come up with an Inside determination and still a self employed contractor is perfectly fine.

Ok, absolutely some agencies etc have no idea what the hell they are doing... had one very worried after discussing the fact the client was an overseas client and that changed who's responsible for the tax should HMRC disagree on the determination. The right outcome is the agency to admit IR35 is irrelevant. That said, there are many more reasons why they should be worried about a self employed contractor than IR35