Inside IR35 and LTD company
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    Default Inside IR35 and LTD company

    Hi all, I have accepted my first contract and handed in my notice. My first job is inside IR35 for the public sector in London and I'm a little bit (probably more than a little) confused about how I actually get paid.

    I have my own LTD company set up with a business bank account on it's way soon to be followed by company insurance. I know the tax implications of working outside/inside IR35 as a limited company/umbrella company but decided on the LTD route.

    The agency that have lined me up the job asked me to fill out a form. Please see below with obvious details blurred out.

    For outside IR35 I know you just invoice the client the amount and they pay your company + VAT and then you just pay yourself out of that however you see fit on PAYE.

    I assumed (because of the umbrella.co.uk bit) this form would mean I am being paid directly. NOT to my company. But yet it asks for my business bank account details and LTD company details.

    If they take my tax and NI at source then how does my company then pay me through my PAYE? Or have I got all of this completely wrong?

    Be nice. I'm new!




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    We have an entire sub forum dedicated to this topic. I suggest you go have a read in there, particularly the stickies.
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    Looking at their website umbrella couk do offer Ltd company services.
    Maybe it is just their name is a red herring which I admit does make it confusing.

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    Quote Originally Posted by northernladuk View Post
    We have an entire sub forum dedicated to this topic. I suggest you go have a read in there, particularly the stickies.
    This isn't actually covered in that much detail in the replacement FAQs.

    Basically if you are in a public sector contract working inside IR35 the money goes like this.

    1) Client pays agency.
    2) Agency (via umbrella.co.uk payroll) will deduct Employers NI (and possibly 0.5% Apprenticeship levy) from the payment. They pay that to HMRC directly.#
    3) The Agency will then deduct employees NI and estimated Income tax from the amount left and pay that (on your company's behalf) to HMRC.
    4) The agency will then pay whatever is left to your company for the company to forward on to you...

    That is how it works and its why I've always said don't work through a limited company if inside IR35 instead use an umbrella as that makes things easier reduces your paperwork and gives your greater pension options.
    merely at clientco for the entertainment

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    In a nutshell, inside IR35 and your own Ltd company with agency involved = agency should be making all the PAYE tax deductions before paying your Ltd company. Net figure paid to Ltd company with no further personal taxes due.

    Inside IR35 and umbrella, agency pays umbrella gross figure, umbrella makes all PAYE deductions and pays a personal account with no further taxes to pay on that assignment.
    Just watching what I say

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    Thanks for your help. I did read the FAQ's but still couldn't find the answers I was looking for.

    Quote Originally Posted by eek View Post

    3) The Agency will then deduct employees NI and estimated Income tax from the amount left and pay that (on your company's behalf) to HMRC.

    That is how it works and its why I've always said don't work through a limited company if inside IR35 instead use an umbrella as that makes things easier reduces your paperwork and gives your greater pension options.
    How do they determine what tax to pay on my behalf? I'm assuming I can get some of this money back in April when I file a self-assessment and I don't go over the estimated threshold?

    EDIT: I assume I can just transfer the money directly to my personal account too and keep a record of it? Or is there a specific way you need to do this?

    Also, I decided to go limited as I do want to eventually want get away from IR35 after this contract. It just made sense in my mind to keep all personal income coming from 1 place rather than an LTD + Umbrella.

    Another bonus question... I know working this way means I won't be entitled to claim expenses such as travel through my LTD company. But can I still claim tax relief on my self assessment personally? I know you can do this if self-employed (I think).

    Sorry for silly questions! All very new to this trying to learn as much as possible.

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    eek
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    Quote Originally Posted by bb1990 View Post
    Thanks for your help. I did read the FAQ's but still couldn't find the answers I was looking for.



    How do they determine what tax to pay on my behalf? I'm assuming I can get some of this money back in April when I file a self-assessment and I don't go over the estimated threshold?
    They estimate for income tax. For NI its straightforward as its based on income that week / month - and you can't claim it back
    Quote Originally Posted by bb1990 View Post
    EDIT: I assume I can just transfer the money directly to my personal account too and keep a record of it? Or is there a specific way you need to do this?
    yes as all tax has been paid on it you can take it directly from the company. In fact you really should take it from the company and then if the company needs to pay for anything loan the company the money..

    Quote Originally Posted by bb1990 View Post
    Also, I decided to go limited as I do want to eventually want get away from IR35 after this contract. It just made sense in my mind to keep all personal income coming from 1 place rather than an LTD + Umbrella.
    I really don't think that was a sensible plan. Use a limited company for work outside IR35, use an umbrella for work inside IR35. It will make your life a whole lot easier and may stop HMRC paying close attention to your company down the line.

    Quote Originally Posted by bb1990 View Post
    Another bonus question... I know working this way means I won't be entitled to claim expenses such as travel through my LTD company. But can I still claim tax relief on my self assessment personally? I know you can do this if self-employed (I think).

    Sorry for silly questions! All very new to this trying to learn as much as possible.
    Sadly you are employed by your company not self employed hence I suspect you can't claim back your self assessment costs - its why most accountants offer it as a freebie as part of their accounts package.

    And yes I can see that you are new and have made what to you seem sensible decisions. I personally would have made very different ones based on the additional knowledge I have. If you haven't been paid yet get in touch with Lucy and then the agency and see if you can swap to an umbrella for this contract.
    Last edited by eek; 13th September 2017 at 09:30.
    merely at clientco for the entertainment

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    Quote Originally Posted by saptastic View Post
    Looking at their website umbrella couk do offer Ltd company services.
    Maybe it is just their name is a red herring which I admit does make it confusing.
    Yeah I've met one of the main guys behind umbrella.co.uk at various FreeAgent things, and they do indeed do Ltd Co stuff, for a lot of companies (they're pretty big). I agree name is indeed a bit odd...presumably they do what we'd call umbrella stuff too.

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    Quote Originally Posted by bb1990 View Post
    Thanks for your help. I did read the FAQ's but still couldn't find the answers I was looking for.
    When I wrote the FAQ, I didn't think that (a) agencies would offer this idea because they have all the downsides and no upside; and (b) no contractor would be taking this route because of the additional headaches that it may bring.

    I have now added some more wording now to explain how I believe it works, though
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    eek
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    Quote Originally Posted by TheFaQQer View Post
    When I wrote the FAQ, I didn't think that (a) agencies would offer this idea because they have all the downsides and no upside; and (b) no contractor would be taking this route because of the additional headaches that it may bring.

    I have now added some more wording now to explain how I believe it works, though
    TF that wasn't a comment aimed at what you wrote - more the fact that there wasn't anything there at the moment.

    Personally keeping inside IR35 contracts as far away from your limited company as possible is to me the only sensible plan...
    merely at clientco for the entertainment

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