Existing PAYE employee with second job. Conttact or PAYE ??

[bobrathbone79]

Hello,

I hope someone can give me some direction

I have a primary employer who pays me via PAYE at around £90,000. I have been there 10 years

I have been offered a second role at another company at £75,000 which I can perform as there is no conflict with the primary. i have the option of invoicing through a LTD company or becoming a employee and get paid via PAYE

This second employer is 95% private sector a d 5% public and I want to know which is the best route for me. Obviously going down the company route means a lower tax bill taking into account dividends allowance. I am happy not to draw a salary / dividends over the 5k limit which means I can pay just the corporation tax and keep the money in the company. Does this fall under IR35 as we occasional do work for a public body ?


Regards
Rathbone

[EinsteinTax]

It sounds like the second employer is some form of consultancy that does 95% of their work in the private sector and 5% in the public sector?

IR35 status can be a grey area when working in the public sector via a consultancy. See this article by Kate Cottrell (from IR35 experts Bauer & Cottrell) for more details.

Either way, if 95% of the time you will be working in the private sector I would have thought it would be more tax efficient to operate through a Ltd. There are likely to be far more options in extracting the money at a lower tax rate over the long term than taking a £165k PAYE salary.

[bobrathbone79]

Thanks for the reply.

Reading through the link attempting to make sense of it.

The company provides software services in the form of apps. Its does not supply 'people' but services

[EinsteinTax]

Thanks for the reply.

Reading through the link attempting to make sense of it.

The company provides software services in the form of apps. Its does not supply 'people' but services

If the company is providing software services rather than people to public sector, then it is more likely that the contract and working practices between your Ltd and the company will determine your IR35 status.

It might be worth contacting someone like Kate Cottrell @ Bauer & Cottrell directly to discuss as she will be able to help ensure any contract through your Ltd company is IR35 friendly.

[bobrathbone79]

If the company is providing software services rather than people to public sector, then it is more likely that the contract and working practices between your Ltd and the company will determine your IR35 status.

It might be worth contacting someone like Kate Cottrell @ Bauer & Cottrell directly to discuss as she will be able to help ensure any contract through your Ltd company is IR35 friendly.

thanks, will do.

One final question if you dont mind. Would the second employer send reports of payments to service companies to HMRC? I was informed today that companies must report this to HMRC althoguth I did think that a payment to a company (one man job like myself) would just be treated as a regular invoice. Maybe its public service organisations which have this requirement

[EinsteinTax]

thanks, will do.

One final question if you dont mind. Would the second employer send reports of payments to service companies to HMRC? I was informed today that companies must report this to HMRC althoguth I did think that a payment to a company (one man job like myself) would just be treated as a regular invoice. Maybe its public service organisations which have this requirement

I believe it's only Employment Intermediaries (agencies) that have the reporting requirements (see HMRC guidance here).

So, if the company you will be providing services for is a software house rather than an agency supplying software developers for the end client then the company won't need to report.

However, if your contract with the company is via an agency (rather than direct), then the agency will have reporting requirements.

[TheFaQQer]

I am happy not to draw a salary / dividends over the 5k limit which means I can pay just the corporation tax and keep the money in the company.

Bear in mind that the tax bands will change in the next budget. If you're insistent on not going over the 0% rate for dividends, then one year's income will take 20+ years to extract from the company.

Personally, I'd be inclined to use a Ltd and whack £40k a year into a pension plan as well.