Ltd Company Rate / PAYE rate

[Ashwin2007]

When searching contracts in the contractor uk web site, I find that some contracts mention ltd co. rate xx/hour and some mention PAYE rate.If ltd co rate is mentioned, does it automatically mean it is outside IR35?

Does this mean that at the application stage itself we should mention that we are a limited company to get ltd rate?

[chicane]

What gives you the idea that an hourly rate equates to a limited company rate?

The client would pay that hourly rate regardless of whether you work through a limited or a brolly. The fact that an hourly rate is specified has no effect on the IR35 status of the contract.

What do you mean when you say some contracts mention PAYE rate? The only situation in which I can see this happening is if the role is permanent, or a fixed-term contract.

[Sundance]

When searching contracts in the contractor uk web site, I find that some contracts mention ltd co. rate xx/hour and some mention PAYE rate.If ltd co rate is mentioned, does it automatically mean it is outside IR35?

Does this mean that at the application stage itself we should mention that we are a limited company to get ltd rate?

1). No, it certainly does not mean it is outside of IR35 if the Ltd co. rate is mentioned. This would depend on how the contract was written, and for what period of time, assuming you have no other contracts running in parallel.

2). It is usually best to "inidicate" whether you are Ltd or not at the application stage just in case you need to negotiate any rate movement, if possible. Incidently, if you do not go the Ltd co. route, you would be better off going to a managed services company (e.g. Parasol), rather than working straight PAYE through an agent..... at least then you would get tax relief on any LEGITIMATE expenses, which is a service that very few (if any) agents offer, and you won't have a requirement/need for an accountant every year!

[zathras]

When searching contracts in the contractor uk web site, I find that some contracts mention ltd co. rate xx/hour and some mention PAYE rate.If ltd co rate is mentioned, does it automatically mean it is outside IR35?

No, and if you are on PAYE then IR35 does not apply since you are not going via an intermediary and paying Employment taxes anyway.

Does this mean that at the application stage itself we should mention that we are a limited company to get ltd rate?

You tell them the rate you want for the role (which no doubt would be the limited company rate) - to be honest I've turned down PAYE contracts - why lose 50% of the rate to the taxman, without some nice luvly employment rights

[mace]

I'm guessing that you're under the impression that a daily rate is a "PAYE rate"?

You may be caught by IR35 if your job looks and feels the same as a permie sitting next to you and it lasts longer than a month.

Ways of reducing the chances of IR35 applying are:-

1. Right of substitution i.e. finding a mate who can cover for you.
2. Lack of management control. This is usually the trickiest as clients tend to regard you as a temp a lot of the time, which makes IR35 so disgusting, as clients can tell the Revenue that you were no better than a temp in the full knowledge that it's you that will pay the "national insurance" (tax in another name) whilst they'll be exempt from having to pay you employee benefits (and the government from paying you state benefits). Being able to work from home and define your hours is the best way of demonstrating that you are outside of management control, if you can find an agreeable client.

That said, most tax tribunals have so far recognised that a contractor's tenure is very different from a permies and that IR35 doesn't apply.

IMHO, contractors should be taxed as though they are sole traders. I believe that this was originally the case, and then the Revenue decided in the 70s that they'd pursue clients who employed contractors who resembled temporary employees. Clients avoided this move by insisting that contractors set up limited companies. IR35 was an attempt by this government to have another go at increasing the tax-take, this time by targetting the contractors rather than the clients. The government perceived this would be an easier target, but so far have been proved wrong. If they were more succesful then it would kill the contract market so I suspect they keep IR35 on the books so that they can impose it when they need a bit of extra cash.

[FarmerPalmer]

When searching contracts in the contractor uk web site, I find that some contracts mention ltd co. rate xx/hour and some mention PAYE rate.If ltd co rate is mentioned, does it automatically mean it is outside IR35?

Does this mean that at the application stage itself we should mention that we are a limited company to get ltd rate?

employees must be given, according to employment law, at least 20 days holiday - and so the rate is lower to cover that. Plus employers liability insurance. , handling payroll, etc etc