Discussion
I have been caught by IR35 which is a bummer but it is what it is.
My question is regarding the 5% which I understand is ignored for IR35 purposes as it is to go towards running the limited company and corporation tax is due on that after legitimate expenses.
My agency tell me what they are doing is treating all my day rate as PAYE as that is how they interpret IR35.
I have sent them the IR35 HMRC guidance but they will not budge.
I am not 100% sure I am right and was wondering if anybody on here can point me in the way of definitive guidance on the correct way to do this. My company is not a sham and I do have other work as well as the main one. Been trading since 2003.
My understanding is my day rate is 100 so 95 is subject to PAYE as for a normal employee but 5 is paid to my company this is done before the PAYE stuff....
My question is regarding the 5% which I understand is ignored for IR35 purposes as it is to go towards running the limited company and corporation tax is due on that after legitimate expenses.
My agency tell me what they are doing is treating all my day rate as PAYE as that is how they interpret IR35.
I have sent them the IR35 HMRC guidance but they will not budge.
I am not 100% sure I am right and was wondering if anybody on here can point me in the way of definitive guidance on the correct way to do this. My company is not a sham and I do have other work as well as the main one. Been trading since 2003.
My understanding is my day rate is 100 so 95 is subject to PAYE as for a normal employee but 5 is paid to my company this is done before the PAYE stuff....
Eric Mc said:
Do you use an accountant?
I do and I have emailed him for clarification but I suspect he is a bit tied up at this time of the yearWhen it was announced about IR35 back last year he advised that I would be caught and it was about managing the 5%.
That was based on the guidance then and as you know it does seem to have been a confusing time so that guidance may have changed.
The people who are treated as my employer have lost the contract with the council I work for through them so are less than helpful.
The council say its the agencies job and the agency say the are doing it there way.
If I am mistaken I will wind my neck in but need somewhere else to look where I will get a definitive view
I'm not sure if anybody really knows how to actually account for PAYE and NI being deducted from the income of a limited company.
We've never had such a scenario before.
I will be refusing to take on such clients. Luckilly I don't have any at the moment - although have some "ordinary" IR35 clients (where the company accounts for its own PAYE and NI under the IR35 rules).
We've never had such a scenario before.
I will be refusing to take on such clients. Luckilly I don't have any at the moment - although have some "ordinary" IR35 clients (where the company accounts for its own PAYE and NI under the IR35 rules).
Eric Mc said:
I'm not sure if anybody really knows how to actually account for PAYE and NI being deducted from the income of a limited company.
We've never had such a scenario before.
I will be refusing to take on such clients. Luckilly I don't have any at the moment - although have some "ordinary" IR35 clients (where the company accounts for its own PAYE and NI under the IR35 rules).
This is what my accountant said in November. Does seem that HMRC have not been much help to anyone (as ever)We've never had such a scenario before.
I will be refusing to take on such clients. Luckilly I don't have any at the moment - although have some "ordinary" IR35 clients (where the company accounts for its own PAYE and NI under the IR35 rules).
Whilst we don’t have final details it does appear that you will be caught from April.
This will mean that you will have tax and NI deducted before monies are received by you.
They will then presumably be assessable as deemed employment on you and treated as paid
On 5 April each year so they are taxed as received each year rather than
when you decide to take dividends.
Whether you can still submit a claim for general expenses (5% under current rules) is not yet certain but
the normal employee rules will apply for travelling and other costs..
There will be little that can be done I fear from April 2017. As far as this year is concerned how much are
You planning on drawing from the company. As you know the additional dividend tax of 7.5% applies to
Dividends over £5000.
My interpretation is that YOUR company has to account for PAYE and NI under normal IR35 rules. It therefore has to make the normal payroll returns required under RTI with the final return for the year taking into account any additional amounts due under the IR35 calculation.
The actual PAYMENT of the IR35 tax will have been made by the organisation you work for, so you won't physically have to make any IR35 payments - although you will have to reconcile the amounts they have paid with what you (or your accountant) will have calculated using YOUR interpretation of the IR35 amounts - which may not (and almost definitely won't) result in the same figures.
It's a mess.
The actual PAYMENT of the IR35 tax will have been made by the organisation you work for, so you won't physically have to make any IR35 payments - although you will have to reconcile the amounts they have paid with what you (or your accountant) will have calculated using YOUR interpretation of the IR35 amounts - which may not (and almost definitely won't) result in the same figures.
It's a mess.
Eric Mc said:
My interpretation is that YOUR company has to account for PAYE and NI under normal IR35 rules. It therefore has to make the normal payroll returns required under RTI with the final return for the year taking into account any additional amounts due under the IR35 calculation.
The actual PAYMENT of the IR35 tax will have been made by the organisation you work for, so you won't physically have to make any IR35 payments - although you will have to reconcile the amounts they have paid with what you (or your accountant) will have calculated using YOUR interpretation of the IR35 amounts - which may not (and almost definitely won't) result in the same figures.
It's a mess.
funnily enough that makes perfect sense to what they are doing...but they have not explained it at all to us.The actual PAYMENT of the IR35 tax will have been made by the organisation you work for, so you won't physically have to make any IR35 payments - although you will have to reconcile the amounts they have paid with what you (or your accountant) will have calculated using YOUR interpretation of the IR35 amounts - which may not (and almost definitely won't) result in the same figures.
It's a mess.
The amount they are deducting at source is the emplyers NI...
excellent
thanks :-)
On another subject building a Roden 1/44 Brittania in RAF support command colours :-)
The 5% expenses rule has been removed for public sector contractors deemed inside IR35.
https://www.gov.uk/government/publications/off-pay...
If I was you, I would quit. If you have been operating outside IR35 and now "accept" that you are inside for the same contract, HMRC might come after you.
https://www.gov.uk/government/publications/off-pay...
If I was you, I would quit. If you have been operating outside IR35 and now "accept" that you are inside for the same contract, HMRC might come after you.
Alex said:
The 5% expenses rule has been removed for public sector contractors deemed inside IR35.
https://www.gov.uk/government/publications/off-pay...
If I was you, I would quit. If you have been operating outside IR35 and now "accept" that you are inside for the same contract, HMRC might come after you.
What he saidhttps://www.gov.uk/government/publications/off-pay...
If I was you, I would quit. If you have been operating outside IR35 and now "accept" that you are inside for the same contract, HMRC might come after you.
I've heard from friends that a lot of agencies are forcing them down the umbrella route now for public sector, that or nothing.
k the whole thing is.OP - my understanding is that you would go onto the Agency's payroll and be paid as PAYE. They would include your tax and NI deductions on their RTI return. At the end of the year you should get a P60. When you fill in your self assessment or CT returns or whatever the tax that you have already paid is offset against your tax/NI liability for that year.
Eric Mc said:
I have heard that an "employer" cannot place a limited company onto the payroll as a pseudo-employee. Employee's need to have a valid NI number.
Limited companies do not possess NI numbers.
They won't be placing the company on the payroll. They'll be placing the OP on it, just like any other employee.Limited companies do not possess NI numbers.
Previously the Agency were acting like an Agent. Now they'll be acting as the principal employer and OP will effectively be seconded out to the client.
So, they are effectively putting the individual on the payroll. If they are doing that, they MUST, by default, be offering him an employment contract - with all that that involves (employment rights etc)
If that is the case, the individual should shut the company down and become a normal employee.
The alternative is for the individual to walk away.
If that is the case, the individual should shut the company down and become a normal employee.
The alternative is for the individual to walk away.
Eric Mc said:
So, they are effectively putting the individual on the payroll. If they are doing that, they MUST, by default, be offering him an employment contract - with all that that involves (employment rights etc)
If that is the case, the individual should shut the company down and become a normal employee.
The alternative is for the individual to walk away.
Arguably that's exactly why the govt. is doing this. It wants self employed people to be PAYE, to collect more tax and NI. Like with all things in life people have to weigh up the pro's and cons and decide accordingly.If that is the case, the individual should shut the company down and become a normal employee.
The alternative is for the individual to walk away.
But how are the employers handling this?
By putting these individuals on the payroll, are they formally admitting that they are now bona fide employees and therefore their engagement comes fully under employment regulations?
If they are not, then these new employees have a strong legal case for employment status and the linked rights.
By putting these individuals on the payroll, are they formally admitting that they are now bona fide employees and therefore their engagement comes fully under employment regulations?
If they are not, then these new employees have a strong legal case for employment status and the linked rights.
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