Its been a while - return to contracting

[polski]

Well, the last time I had dealings here was probably 2000, when I took the shilling and moved back to permanent employment (entirely due to circumstances - no contract!).

For location reasons I am thinking of looking to contract work to try and be at home more, and this might be the best route to doing that.

I finished when IR35 was gathering speed, so come from 11 years of dividends, nominal salaries etc. I realise now (having watch from a distance) that times have changed, and that the whole regime is very technical in terms of the way contractors are having to carry out their business.

I was wondering what the implications may be of taking a contract as a LTD, with no intention of trying to squeeze the money pot to its minimum, but to take the max salary a rate may allow (assuming I pay the correct tax, NI, ENI). Apart from others thinking I was mad, would this, in the eyes of HMRC, leave me free to get on with doing business, or would the 24 month rule force me to change contracts? I'm really happy to just play everything above board (I'm sure you all do), but also just want to be able to carry on earning without having to be constantly worried about whether I'm in or out of schemes.

Or is it just not that simple?

Thoughts welcome!

Thanks

[mudskipper]

If you operate "inside" IR35, then you need to operate a deemed salary payment on 95% of your income (including employers NI).

You cannot claim travel and subsistence to the location of your contract if you are inside IR35, so the 24 month rule is irrelevant.

[doconline]

Would you not be better off using an umbrella if you aren't going to make use of the tax benefits etc of running a LTD company. I think the Umbrella fees will be cheaper than the cost of running your LTD, but might be wrong here?

[missinggreenfields]

would the 24 month rule force me to change contracts?

You could still be caught by the 24 month rule.

[missinggreenfields]

Would you not be better off using an umbrella if you aren't going to make use of the tax benefits etc of running a LTD company. I think the Umbrella fees will be cheaper than the cost of running your LTD, but might be wrong here?

Depends if there are significant travel and subsistence expenses - if there are, then you could operate through a limited company, be outside IR35, pay everything out as PAYE, but still claim expenses.

Chances of an IR35 investigation must be low if you're already paying out everything in PAYE and NICs, but you could still claim your travel and subsistence.

[VectraMan]

Depends if there are significant travel and subsistence expenses - if there are, then you could operate through a limited company, be outside IR35, pay everything out as PAYE, but still claim expenses.

Chances of an IR35 investigation must be low if you're already paying out everything in PAYE and NICs, but you could still claim your travel and subsistence.

Strictly speaking it's if you're under SDC that means you can't claim your daily travel expenses (but not other travel expenses), not whether you're inside IR35. If you pay it all out as salary then really IR35 is irrelevant and although they could in theory investigate you you don't have anything to worry about. It also means no having to pay for QDOS or IPSE; no worrying about getting contract reviews, and no worrying about working practices: just tell the client you're happy to do whatever and get on with earning a living. Which is nice.

If you're happy to make hefty pension contributions it's not so bad.

[mudskipper]

Strictly speaking it's if you're under SDC that means you can't claim your daily travel expenses (but not other travel expenses), not whether you're inside IR35. If you pay it all out as salary then really IR35 is irrelevant and although they could in theory investigate you you don't have anything to worry about. It also means no having to pay for QDOS or IPSE; no worrying about getting contract reviews, and no worrying about working practices: just tell the client you're happy to do whatever and get on with earning a living. Which is nice.

If you're happy to make hefty pension contributions it's not so bad.

It depends how you're operating. The 'rule' for a limited company is 'IR35'. If you're paying everything as salary, the guidance says you should still apply the IR35 test to determine entitlement to claim T&S. For a brolly, the test is SDC.

[missinggreenfields]

Strictly speaking it's if you're under SDC that means you can't claim your daily travel expenses (but not other travel expenses), not whether you're inside IR35. If you pay it all out as salary then really IR35 is irrelevant and although they could in theory investigate you you don't have anything to worry about. It also means no having to pay for QDOS or IPSE; no worrying about getting contract reviews, and no worrying about working practices: just tell the client you're happy to do whatever and get on with earning a living. Which is nice.

If you're happy to make hefty pension contributions it's not so bad.

SDC is the umbrella check
IR35 is the limited company check

At the moment, one could be much harder to pass than the other.

[polski]

Further...

Hi,
for first contract I'm not expecting high travel costs. Part of the reason for the move is to get home daily. Either petrol costs around 80 mile/day or look into season ticket. either way it's still less than it has been in the past, but it will be the same site for nearly 100% of the time.

Assuming I am in 'IR35', is there no allowable expense? And does the 24 month rule mean that after this period, the client is still liable for something even if I'm paying myself most of the money in salary?

Umbrellas were only just starting when I last contracted as a response to IR35, but I have to say I'm not minded to trust them. Happy with a limited company, just don't want the hassle of proving I'm not out to avoid paying tax. Been there, done that, got many T-shirts. Not likely to have multiple contracts, so probably firmly in the IR35 claws so no point fighting it.

Pension contributions likely to be the main benefit, and I'm hoping there's no (reasonable) limit on the level of payments.

As I haven't got the contract yet , I'm just researching the ground, but there is likely to be public sector involvement so not sure if that will make a difference.

Thanks

[unixman]

Hi OP welcome back. I'm surprised that you say contracting will help you spend more time at home. It often means more travel, depending on where you live.