Discussion
daemon said:
If you're inside IR35, the company ISNT the rightful recipient of the income, the individual is.
Outside IR35 = you're an employee of your own limited company (or umbrella co). You get your day rate paid to the LTD Co, the LTD Co pays you.
Inside IR35 = you're effectively an agency worker (for want of a better description), the agency pays you (usually through their umbrella company) via PAYE and directly in to your personal account. No requirement to go through limited company
You are confusing TAX treatment with the legality of the actual contract.Outside IR35 = you're an employee of your own limited company (or umbrella co). You get your day rate paid to the LTD Co, the LTD Co pays you.
Inside IR35 = you're effectively an agency worker (for want of a better description), the agency pays you (usually through their umbrella company) via PAYE and directly in to your personal account. No requirement to go through limited company
If an individual operates through a limited company, the LEGAL position is that the contract is between the limited company and the organisation with which it does business. This is a legal situation and has nothing to do with tax.
Don't forget that the terminology used by HMRC is defining whether IR35 applies or not is "deemed employment".
"Deemed " in law means we are looking at an "interpretation" rather than "actuality".
The contract (the legal position) is still resting in then hands of the limited company and not the individual. If some other issues (not tax related) blows up between the contractor and the organisation he/she is working for, the row would be between the company and the organisation, not the individual and the organisation.
In certain restricted circumstances, the "veil of incorporation" MAY be lifted and the individual pursued personally - but that is actually quite rare.
Eric Mc said:
daemon said:
If you're inside IR35, the company ISNT the rightful recipient of the income, the individual is.
Outside IR35 = you're an employee of your own limited company (or umbrella co). You get your day rate paid to the LTD Co, the LTD Co pays you.
Inside IR35 = you're effectively an agency worker (for want of a better description), the agency pays you (usually through their umbrella company) via PAYE and directly in to your personal account. No requirement to go through limited company
You are confusing TAX treatment with the legality of the actual contract.Outside IR35 = you're an employee of your own limited company (or umbrella co). You get your day rate paid to the LTD Co, the LTD Co pays you.
Inside IR35 = you're effectively an agency worker (for want of a better description), the agency pays you (usually through their umbrella company) via PAYE and directly in to your personal account. No requirement to go through limited company
If an individual operates through a limited company, the LEGAL position is that the contract is between the limited company and the organisation with which it does business. This is a legal situation and has nothing to do with tax.
Don't forget that the terminology used by HMRC is defining whether IR35 applies or not is "deemed employment".
"Deemed " in law means we are looking at an "interpretation" rather than "actuality".
The contract (the legal position) is still resting in then hands of the limited company and not the individual. If some other issues (not tax related) blows up between the contractor and the organisation he/she is working for, the row would be between the company and the organisation, not the individual and the organisation.
In certain restricted circumstances, the "veil of incorporation" MAY be lifted and the individual pursued personally - but that is actually quite rare.
Must confess I am somewhat confused now so may have this entirely wrong.
alfie2244 said:
Sorry Eric I may be misreading this but I thought the suggestion was to "hibernate" the Ltd Co and, under contract, work as an individual, not through a Ltd Co on a PAYE basis inside IR35...hence their is no contract with the Ltd Co whatsoever. The agency / Umbrella employs the individual and all taxes etc are deducted by the Umbrella.
Must confess I am somewhat confused now so may have this entirely wrong.
IR35 ONLY APPLIES TO INTERMEDIARIES i.e. entities set up between the individual and the organisations for which they are performing work. The most common form of intermediary used is the limited company but sometimes limited liability partnerships, old style partnerships or other even more exotic structures are used(such as off shore trusts or off shore companies). It is the INTERMEDIARY that gets caught under IR35, NOT the individual.Must confess I am somewhat confused now so may have this entirely wrong.
If an individual decides to park his intermediary entity to one side and engage PERSONALLY with the organisation for which he is working, IR35 DOES NOT APPLY. He is now an individual and his status will either be that of an employee or, if appropriate, a self-employed sole trader.
Eric Mc said:
IR35 ONLY APPLIES TO INTERMEDIARIES i.e. entities set up between the individual and the organisations for which they are performing work. The most common form of intermediary used is the limited company but sometimes limited liability partnerships, old style partnerships or other even more exotic structures are used(such as off shore trusts or off shore companies). It is the INTERMEDIARY that gets caught under IR35, NOT the individual.
If an individual decides to park his intermediary entity to one side and engage PERSONALLY with the organisation for which he is working, IR35 DOES NOT APPLY. He is now an individual and his status will either be that of an employee or, if appropriate, a self-employed sole trader.
I really am confused as I thought the OP had started work via an agency (intermediary) not direct for the client so struggling to see the relevence.If an individual decides to park his intermediary entity to one side and engage PERSONALLY with the organisation for which he is working, IR35 DOES NOT APPLY. He is now an individual and his status will either be that of an employee or, if appropriate, a self-employed sole trader.
Too Late said:
Hi all
Is there anyone on here who contract inside IR-35
New contract starts Monday and my head hurts and since being emailing my the finance department of my agency, they have only confused matters worse
Before i post my questions, i thought i would ask if anyone here works inside IR35 for gov or public
Thanks
Is there anyone on here who contract inside IR-35
New contract starts Monday and my head hurts and since being emailing my the finance department of my agency, they have only confused matters worse
Before i post my questions, i thought i would ask if anyone here works inside IR35 for gov or public
Thanks
alfie2244 said:
Eric Mc said:
IR35 ONLY APPLIES TO INTERMEDIARIES i.e. entities set up between the individual and the organisations for which they are performing work. The most common form of intermediary used is the limited company but sometimes limited liability partnerships, old style partnerships or other even more exotic structures are used(such as off shore trusts or off shore companies). It is the INTERMEDIARY that gets caught under IR35, NOT the individual.
If an individual decides to park his intermediary entity to one side and engage PERSONALLY with the organisation for which he is working, IR35 DOES NOT APPLY. He is now an individual and his status will either be that of an employee or, if appropriate, a self-employed sole trader.
I really am confused as I thought the OP had started work via an agency (intermediary) not direct for the client so struggling to see the relevence.If an individual decides to park his intermediary entity to one side and engage PERSONALLY with the organisation for which he is working, IR35 DOES NOT APPLY. He is now an individual and his status will either be that of an employee or, if appropriate, a self-employed sole trader.
Too Late said:
Hi all
Is there anyone on here who contract inside IR-35
New contract starts Monday and my head hurts and since being emailing my the finance department of my agency, they have only confused matters worse
Before i post my questions, i thought i would ask if anyone here works inside IR35 for gov or public
Thanks
Is there anyone on here who contract inside IR-35
New contract starts Monday and my head hurts and since being emailing my the finance department of my agency, they have only confused matters worse
Before i post my questions, i thought i would ask if anyone here works inside IR35 for gov or public
Thanks
IR35 was introduced in 2000 in order to prevent people from hiding behind some sort of intermediary structure as explained by me above.
Here is a brief explanation s to why it was introduced and how it was introduced -
In 1999, as part of that year’s Budget, the UK’s Chancellor of the Exchequer, Gordon Brown, announced that measures would be introduced to counter tax avoidance by the use of so-called "personal service companies". Properly known as the "intermediaries legislation", it is more commonly referred to by the consecutively numbered Inland Revenue (now HMRC) budget press release number 35 in which it was announced (i.e. the 35th press release of that year), titled IR35: Countering Avoidance in the Provision of Personal Services.[2] The press release [3] was issued on 9 March 1999, the same day as the Chancellor of the Exchequer's budget statement.
It came into force throughout the UK in April 2000. Although it was part of that year's Finance Act and was not law at the start of the Financial Year, the Act backdated its commencement to 6 April 2000. The legislation has been consolidated in the Income Tax (Earnings and Pensions) Act 2003 and in the Statutory Instrument Social Security Contributions (Intermediaries) Regulations 2000, SI 2000/727. The Finance Act 2017 implements changes in the process for determining the amount of income tax and national insurance to be deducted.
Eric Mc said:
People get confused because they don't understand what IR35 is really about. It was never applied to individuals. There has always been plenty of legislation and HMRC practice in place to allow an individual or his "employer" or HMRC to work out what his/her tax status should be (employed or self employed).
IR35 was introduced in 2000 in order to prevent people from hiding behind some sort of intermediary structure as explained by me above.
Here is a brief explanation s to why it was introduced and how it was introduced -
In 1999, as part of that year’s Budget, the UK’s Chancellor of the Exchequer, Gordon Brown, announced that measures would be introduced to counter tax avoidance by the use of so-called "personal service companies". Properly known as the "intermediaries legislation", it is more commonly referred to by the consecutively numbered Inland Revenue (now HMRC) budget press release number 35 in which it was announced (i.e. the 35th press release of that year), titled IR35: Countering Avoidance in the Provision of Personal Services.[2] The press release [3] was issued on 9 March 1999, the same day as the Chancellor of the Exchequer's budget statement.
It came into force throughout the UK in April 2000. Although it was part of that year's Finance Act and was not law at the start of the Financial Year, the Act backdated its commencement to 6 April 2000. The legislation has been consolidated in the Income Tax (Earnings and Pensions) Act 2003 and in the Statutory Instrument Social Security Contributions (Intermediaries) Regulations 2000, SI 2000/727. The Finance Act 2017 implements changes in the process for determining the amount of income tax and national insurance to be deducted.
No offence Eric but I am glad you are not my accountant as you seem to make things so unnecessarily complicated. I don't doubt a single bit of your posts are incorrect but it really is much simpler than you are making it sound and I am really not sure much of it relates to what the OP posted.IR35 was introduced in 2000 in order to prevent people from hiding behind some sort of intermediary structure as explained by me above.
Here is a brief explanation s to why it was introduced and how it was introduced -
In 1999, as part of that year’s Budget, the UK’s Chancellor of the Exchequer, Gordon Brown, announced that measures would be introduced to counter tax avoidance by the use of so-called "personal service companies". Properly known as the "intermediaries legislation", it is more commonly referred to by the consecutively numbered Inland Revenue (now HMRC) budget press release number 35 in which it was announced (i.e. the 35th press release of that year), titled IR35: Countering Avoidance in the Provision of Personal Services.[2] The press release [3] was issued on 9 March 1999, the same day as the Chancellor of the Exchequer's budget statement.
It came into force throughout the UK in April 2000. Although it was part of that year's Finance Act and was not law at the start of the Financial Year, the Act backdated its commencement to 6 April 2000. The legislation has been consolidated in the Income Tax (Earnings and Pensions) Act 2003 and in the Statutory Instrument Social Security Contributions (Intermediaries) Regulations 2000, SI 2000/727. The Finance Act 2017 implements changes in the process for determining the amount of income tax and national insurance to be deducted.
alfie2244 said:
Eric Mc said:
People get confused because they don't understand what IR35 is really about. It was never applied to individuals. There has always been plenty of legislation and HMRC practice in place to allow an individual or his "employer" or HMRC to work out what his/her tax status should be (employed or self employed).
IR35 was introduced in 2000 in order to prevent people from hiding behind some sort of intermediary structure as explained by me above.
Here is a brief explanation s to why it was introduced and how it was introduced -
In 1999, as part of that year’s Budget, the UK’s Chancellor of the Exchequer, Gordon Brown, announced that measures would be introduced to counter tax avoidance by the use of so-called "personal service companies". Properly known as the "intermediaries legislation", it is more commonly referred to by the consecutively numbered Inland Revenue (now HMRC) budget press release number 35 in which it was announced (i.e. the 35th press release of that year), titled IR35: Countering Avoidance in the Provision of Personal Services.[2] The press release [3] was issued on 9 March 1999, the same day as the Chancellor of the Exchequer's budget statement.
It came into force throughout the UK in April 2000. Although it was part of that year's Finance Act and was not law at the start of the Financial Year, the Act backdated its commencement to 6 April 2000. The legislation has been consolidated in the Income Tax (Earnings and Pensions) Act 2003 and in the Statutory Instrument Social Security Contributions (Intermediaries) Regulations 2000, SI 2000/727. The Finance Act 2017 implements changes in the process for determining the amount of income tax and national insurance to be deducted.
No offence Eric but I am glad you are not my accountant as you seem to make things so unnecessarily complicated. I don't doubt a single bit of your posts are incorrect but it really is much simpler than you are making it sound and I am really not sure much of it relates to what the OP posted.IR35 was introduced in 2000 in order to prevent people from hiding behind some sort of intermediary structure as explained by me above.
Here is a brief explanation s to why it was introduced and how it was introduced -
In 1999, as part of that year’s Budget, the UK’s Chancellor of the Exchequer, Gordon Brown, announced that measures would be introduced to counter tax avoidance by the use of so-called "personal service companies". Properly known as the "intermediaries legislation", it is more commonly referred to by the consecutively numbered Inland Revenue (now HMRC) budget press release number 35 in which it was announced (i.e. the 35th press release of that year), titled IR35: Countering Avoidance in the Provision of Personal Services.[2] The press release [3] was issued on 9 March 1999, the same day as the Chancellor of the Exchequer's budget statement.
It came into force throughout the UK in April 2000. Although it was part of that year's Finance Act and was not law at the start of the Financial Year, the Act backdated its commencement to 6 April 2000. The legislation has been consolidated in the Income Tax (Earnings and Pensions) Act 2003 and in the Statutory Instrument Social Security Contributions (Intermediaries) Regulations 2000, SI 2000/727. The Finance Act 2017 implements changes in the process for determining the amount of income tax and national insurance to be deducted.
If you can't get your head around the fundamentals of IR35, there is nothing more I can do to explain it any clearer than I have.
And, as regards to what I tell my clients, it would be professionally negligent of me if I DIDN'T explain to them how these regulations work.
Eric Mc said:
Sorry, I don't make things complicated. The LEGISLATION makes things complicated. If you think the law is complex, don't blame me.
If you can't get your head around the fundamentals of IR35, there is nothing more I can do to explain it any clearer than I have.
And, as regards to what I tell my clients, it would be professionally negligent of me if I DIDN'T explain to them how these regulations work.
As stated..I am glad you are not my accountant If you can't get your head around the fundamentals of IR35, there is nothing more I can do to explain it any clearer than I have.
And, as regards to what I tell my clients, it would be professionally negligent of me if I DIDN'T explain to them how these regulations work.
Eric Mc said:
IR35 was introduced in 2000 in order to prevent people from hiding behind some sort of intermediary structure as explained by me above.
No it wasn't, it was introduced to put contractors out of work.Nobody hid behind intermediaries. It was just that clients would not provide work to contractors without an intermediary in case they were regarded as employing them. So contractors were forced to set up limited companies at great hassle and expense just in order to work. At which point the HMRC decided this was some kind of tax dodge and changed the rules.
What exactly were contractors supposed to if not to use intermediaries?
Eric Mc said:
If an individual decides to park his intermediary entity to one side and engage PERSONALLY with the organisation for which he is working, IR35 DOES NOT APPLY. He is now an individual and his status will either be that of an employee or, if appropriate, a self-employed sole trader.
And thats what the O/P and I do.To (try to) speak your language - I am on an inside IR35 contract, therefore i opt to park the intermediary entity and engage personally with the organisation - in my case (and the O/Ps) thats through the agency / the agencies umbrella company.
I cant see any reason why i'd want to pay PAYE tax and then push that through my limited company?
Unless you can tell me differently as to why that would be a good idea?
Edited by daemon on Saturday 20th January 13:16
alfie2244 said:
Sorry Eric I may be misreading this but I thought the suggestion was to "hibernate" the Ltd Co and, under contract, work as an individual, not through a Ltd Co on a PAYE basis inside IR35...hence their is no contract with the Ltd Co whatsoever. The agency / Umbrella employs the individual and all taxes etc are deducted by the Umbrella.
Must confess I am somewhat confused now so may have this entirely wrong.
Must confess I am somewhat confused now so may have this entirely wrong.
Thats my understanding - and what my accountant recommended i do.
To push the PAYE deducted salary onwards through a limited company would seem only to benefit the accountant (in terms of hours chargeable) rather than be of any benefit to the individual
Eric Mc said:
People get confused because they don't understand what IR35 is really about. It was never applied to individuals. There has always been plenty of legislation and HMRC practice in place to allow an individual or his "employer" or HMRC to work out what his/her tax status should be (employed or self employed).
Surely the whole point was that it WAS aimed at individuals? ie, those people who operate one man companies - PSCs - in order to ensure that those people who ran a PSC paid PAYE tax IF they were effectively "temping" in a clients organisation (for want of a better term) as opposed to providing a service.Edited by daemon on Saturday 20th January 13:23
daemon said:
Surely the whole point was that it WAS aimed at individuals? ie, those people who operate one man companies - referred to by HMRC as PSCs (Personal Service Companies) - in order to ensure that those people who ran a PSC paid PAYE tax IF they were effectively "temping" in a clients organisation (for want of a better term).
"Aimed" and "applied" are two different words.Yes, HMRC was annoyed that they were not getting the full amount of PAYE and NI that they would normally get if the individual concerned had been employed in the normal way. So they created a new tax treatment for personal service COMPANIES (and other intermediaries) so that THE COMPANIES would be liable for the same levels of tax and NI that the individual would otherwise have paid.
AIMED at individuals.
APPLIED to companies (or other intermediaries)
Eric Mc said:
daemon said:
Surely the whole point was that it WAS aimed at individuals? ie, those people who operate one man companies - referred to by HMRC as PSCs (Personal Service Companies) - in order to ensure that those people who ran a PSC paid PAYE tax IF they were effectively "temping" in a clients organisation (for want of a better term).
"Aimed" and "applied" are two different words.Yes, HMRC was annoyed that they were not getting the full amount of PAYE and NI that they would normally get if the individual concerned had been employed in the normal way. So they created a new tax treatment for personal service COMPANIES (and other intermediaries) so that THE COMPANIES would be liable for the same levels of tax and NI that the individual would otherwise have paid.
AIMED at individuals.
APPLIED to companies (or other intermediaries)
The legislation was introduced to ensure people who were effectively "temping" in job roles and were doing so through a PSC paid tax as PAYE as opposed to true PSCs who were offering a service to an organisation.
So you can dance around the words AIMED and APPLIED but realistically it was aimed at and applied to one man band PSCs to ensure they werent effectively "temping" and thus not paying the right level of tax..
daemon said:
You've highlighted the word COMPANIES - however the actual context is Personal Service COMPANIES - which are effectively one man bands, NOT "COMPANIES" in the true sense of the word.
The legislation was introduced to ensure people who were effectively "temping" in job roles and were doing so through a PSC paid tax as PAYE as opposed to true PSCs who were offering a service to an organisation.
So you can dance around the words AIMED and APPLIED but realistically it was aimed at and applied to one man band PSCs to ensure they werent effectively "temping" and thus not paying the right level of tax..
Do you know that IR35 is not solely about one man band companies? The legislation is about relationships between individuals in all sorts of entities and the people they are working for. Obviously, the "one man band company" is the most vulnerable to an IR35 attack but the rules were framed so as to catch ANY businesses with multiple directors and or partners who had relationships with their cleints where a director or a partner could cause an IR35 problem.The legislation was introduced to ensure people who were effectively "temping" in job roles and were doing so through a PSC paid tax as PAYE as opposed to true PSCs who were offering a service to an organisation.
So you can dance around the words AIMED and APPLIED but realistically it was aimed at and applied to one man band PSCs to ensure they werent effectively "temping" and thus not paying the right level of tax..
As I keep saying, if IR35 is "deemed" to be appropriate, it is not the INDIVIUDUAL that has to stump up the underpaid taxes and NI, but the VEHICLE they are using as an intermediary.
It's not the PERSONAL who is exposed to the liability, it's their INTERMEDIARY that is exposed.
There is a significant legal distinction in that very issue.
Eric Mc said:
As I keep saying, if IR35 is "deemed" to be appropriate, it is not the INDIVIUDUAL that has to stump up the underpaid taxes and NI, but the VEHICLE they are using as an intermediary.
It's not the PERSONAL who is exposed to the liability, it's their INTERMEDIARY that is exposed.
There is a significant legal distinction in that very issue.
Agreed.It's not the PERSONAL who is exposed to the liability, it's their INTERMEDIARY that is exposed.
There is a significant legal distinction in that very issue.
So back to a question i asked you - what advantage would there be in me pushing my PAYE salary from my inside IR35 contract through my LTD co, as opposed to it being dormant as it is currently, other than my accountant racking up some extra revenue hours sorting it out in my LTD co accounts?
Eric Mc said:
Could you clarify if your current contract is with a government or local government entity (because of the rules introduced on 6 April 2017)?
Why does that matter? If its deemed inside IR35 then who the end client is doesnt matter.As you would know, the rules of IR35 didnt change on 6th April 2017.
daemon said:
Eric Mc said:
Could you clarify if your current contract is with a government or local government entity (because of the rules introduced on 6 April 2017)?
Why does that matter? If its deemed inside IR35 then who the end client is doesnt matter.As you would know, the rules of IR35 didnt change on 6th April 2017.
The rules changed in April 2017 for intermediaries working for government agencies. The rule states that if that is the case AND IR35 applies, the organisation PAYING the intermediary is obliged to calculate and deduct PAYE and NI on the payments. For non government work the onus is on the INTERMEDIARY to calculate, deduct and pay over the PAYE and NI.
It has had a significant impact on the contracting sector so YES, it makes a HUGE difference.
Eric Mc said:
daemon said:
Eric Mc said:
Could you clarify if your current contract is with a government or local government entity (because of the rules introduced on 6 April 2017)?
Why does that matter? If its deemed inside IR35 then who the end client is doesnt matter.As you would know, the rules of IR35 didnt change on 6th April 2017.
The rules changed in April 2017 for intermediaries working for government agencies. The rule states that if that is the case AND IR35 applies, the organisation PAYING the intermediary is obliged to calculate and deduct PAYE and NI on the payments. For non government work the onus is on the INTERMEDIARY to calculate, deduct and pay over the PAYE and NI.
It has had a significant impact on the contracting sector so YES, it makes a HUGE difference.
You seemed to be implying that there was an issue with not pushing it through the limited company, and i am curious as to why.
Its a local government contract.
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