Difference between contractors and employees for payroll tax

[CC07 PEU]

Are there ever any circumstances when a company would offer a short term contract position and have that person on the payroll rather than the contractor issuing an invoice for the work? If so, what would the reasons be for this as I understand the company saves tax by not having the person on the payroll?

[98elise]

Fix Term Contract is a normal way of doing that.

Also contract type jobs are being offered PAYE in the public sector due to IR35. I got an offer like that yesterday. X daily rate PAYE, or y daily rate through an umbrella. No option as a contractor

I declined.

[CC07 PEU]

Ok, useful to know thanks.

[StevieBee]

We regularly employ team of people on short, fixed term contracts for periods of anywhere between four weeks up to a year.

We used to offer them a choice of two contracts: Freelance: They submit their time sheet, we approve and generate an invoice. They sign a confirmation that they sort their own tax, etc.. or PAYE

For us, it was handy to have as many Freelancers as we were not liable for NI payments and kept admin very simple which reflected in a more competitive price we were able to charge.

The contracts were fundamentally the same for each; only the terminology and payment details differed.

However, the HMRC said we could't do this unless the Freelancers were registered as providers of the services that they were providing to us. This was impossible as most of the people were doing many different things, not just our work (e.g.: we had one guy who was a Freelance architect who took a roll with us as his business had gone very quiet).

So now, all staff are PAYE payroll staff members.

[Autopilot]

98elise said:

Fix Term Contract is a normal way of doing that.

Also contract type jobs are being offered PAYE in the public sector due to IR35. I got an offer like that yesterday. X daily rate PAYE, or y daily rate through an umbrella. No option as a contractor

I declined.

IR35 in the public sector was a mess due to most public sector bodies not understanding it. The legislation hasn't changed, just who decides the status of the contract and who's accountable if it's wrong if investigated. Luckily the Finance Bill stated that reasonable care must be taken and blanket statements that deem people in or out weren't allowed.

I wonder how long it will be until it's applied to the private sector?