Tax question

[smithma0]

About to be made redundant (voluntary) in an IT role. I will be looking for other employment in most likely a permanent role, on PAYE. Have been asked if I'd like to do some support work on the system I previously worked on - a couple of days a month, probably totalling about £10k a year.

What is the best way to pay my dues on this additional income? I don't want to set up a Ltd company for such a small sum. Would an umbrella company be interested for such a limited income?

Thanks for any advice.

[Eric Mc]

They are making you redundant and then immediately re-hiring you?

[smithma0]

Yes, not enough work for the role to continue but a couple of days support and minor enhancements a month.

Edited by smithma0 on Monday 4th October 15:09

[Eric Mc]

smithma0 said:

Yes, not enough work for the role to continue but a couple of days support and minor enhancements a month.

Edited by smithma0 on Monday 4th October 15:09

And they are now rehiring you as part time staff?

[smithma0]

No, on some sort of consultancy basis. No firm offer has been made yet.

[Eric Mc]

smithma0 said:

No, on some sort of consultancy basis. No firm offer has been made yet.

Just be careful.

As a consultant to a former employer, HMRC would expect you to be rehired as a part time EMPLOYEE.

However, your employer may decide that you are no longer a "proper" employee and will want to pay you as if you are some sort of independent, trading consultancy firm. Unless you have set yourself up in such a way, they should not really try this. In what other ways do you consider yourself to be self-employed/trading?
Will they allow you to sell your services to other businesses - who are possible rivals to your former employer?
Do you plan to advertise your consultancy services?
Will you be setting up your own place of business?
Will you be taking on your own staff?
Will you be taking out insurance policies to cover your new "trading" situation?

Setting up as a limited company will only serve to expose you and your company to the risks of IR35.

Edited by Eric Mc on Monday 4th October 15:50

[evolution666]

could the likes of Parasol IT not be of help.

One of many umbrella companies i know, sorted out all of my IOM earnings for 4 years with out so much as a whisper from the IRC (to date)

[Eric Mc]

Who are the IRC?

Umbrella companies are under observation by HMRC. I think the only reason they haven't been tackled with more vigour by HMRC is down to lack of resources.

Edited by Eric Mc on Wednesday 6th October 07:55

[scirocco265]

Might be worth looking at HMRC's employment status page:

http://www.hmrc.gov.uk/employment-status/index.htm

[evolution666]

dont know why there was a "C" on there, IR, inland revenue, my mistake

[Eric Mc]

evolution666 said:

dont know why there was a "C" on there, IR, inland revenue, my mistake

The Inland Revenue (IR) no longer exists. A number of years ago the Inland Revenue effectively took over HM Customs and Excise (HMCE) to become HM Revenue and Customs (HMRC).