VAT, tax, end of year, contracts IR35 mess!

ddh76

Hi.

i have an inside IR35 contract which is paying me enough to make my tax code 0T through a Ltd co.

i am also doing some work for a non IR35 contract and getting paid for this monthly with VAT through the same Ltd co.

As I am now making a profit because of the non IR35 contract, am I better off getting paid directly to myself as a sole trader for the non IR35 contract?  Otherwise every pay packet I am deducting 20% for corporation tax and 38.5% for dividend.  So doesnt leave me with much after getting paid.  There’s also VAT too on every invoice.

i am likely to stop working on both of these contracts in June and will start a FT role but wondered what best options were.  Appreciate I could pay into my pension from the pay I get from the outside IR35 contract but then I can’t really access the money at all.

any thoughts out there anyone?

thanks!

Grumpy_chap

ddh76 said:

Hi.

i have an inside IR35 contract which is paying me enough to make my tax code 0T through a Ltd co.

i am also doing some work for a non IR35 contract and getting paid for this monthly with VAT through the same Ltd co.

As I am now making a profit because of the non IR35 contract, am I better off getting paid directly to myself as a sole trader for the non IR35 contract?  Otherwise every pay packet I am deducting 20% for corporation tax and 38.5% for dividend.  So doesnt leave me with much after getting paid.  There’s also VAT too on every invoice.

i am likely to stop working on both of these contracts in June and will start a FT role but wondered what best options were.  Appreciate I could pay into my pension from the pay I get from the outside IR35 contract but then I can’t really access the money at all.

any thoughts out there anyone?

thanks!

That is an unusual way of operating.

Usually the inside IR35 role would be paid via an Umbrella Company who subsequently pay you as an individual via PAYE.  Typically, the UC will allow salary sacrifice pension contributions.  It would be unusual (and complicated) for this inside IR35 pay via the UC to then pay via your own Ltd Co.

Work outside IR35 can then go via the Ltd Co.  This has more flexibility as you can make more choices about pension contributions, salary, dividend, and expenses are allowed for operating the business.

How did you come to have inside IR35 role paid via the Ltd Co?

ddh76

It’s through an outsourced contractor who manages all of my customers agencies and contractors- huge global business .  They do my payroll and then pay me the rest in to my Ltd company (and the VAT)

Grumpy_chap

ddh76 said:

It’s through an outsourced contractor who manages all of my customers agencies and contractors- huge global business .  They do my payroll and then pay me the rest in to my Ltd company (and the VAT)

It's not an unheard of arrangement.  Did you take any advice before choosing this route?
Being paid inside IR35 post payroll into your Ltd Co is the least tax efficient arrangement possible.
Why aren't you paid the post payroll direct as an individual?

The outside IR35 work can still go via the Ltd Co.

DullGreyGuy

Id go back to which ever person recommended you put the Inside monies via your Ltd and ask them to advise on things for you. 

I've done inside work but had to do it via an Umbrella so avoided the mess. Did briefly discuss putting it through the company and just really didnt understand how it worked properly but didnt dig further as it wasn't an option. 

ddh76

I take out of my Ltd co exactly what I get paid from the contracting company, so I'm only paying PAYE.

Grumpy_chap

ddh76 said:

I take out of my Ltd co exactly what I get paid from the contracting company, so I'm only paying PAYE.

Less passing on the VAT element to HMRC, one assumes.
That conflicts with your opening post where you indicated you were suffering double dipping by HMRC, which is how it can work when inside-IR35 income is subject to payroll and then processed via Ltd Co.