Offered Perm Role But Want To Negotiate Outside IR35 Role

[NowPermOutsideUK]

I had been a contractor for many years before I moved abroad. I ll keep the facts short straight and to the point

I have rental income of 75K in my personal name after deductions and expenses (There is also a bit of money coming into the Ltd I had from rental income owned by the company but I have ignored it as I can just leave it in the Ltd and not take a salary). So the figure of 75K in passive income stands after mortgage and agent fees.

I have been offered a perm role - I dont think its important to specify the exact figure but just suppose it was rounded down to 100K.

After spending all day in Excel and working out the tax paid on this extra 100K I ve concluded I cannot take this job as more than half goes to the tax man.

Question 1
So my question is if someone offered you a 100K perm salary, 5% pension, 25 days holiday and you wanted to negotiate not the salary but structuring it as outside IR35 (like the good days) what day rate would that translate to?

Question 2
If I got paid inside IR35 would that allow me to throttle the salary paid like I can do in Ltd setup? That is the crux of the problem - The passive rental income makes working for anything over 50K ish not really worth it whereas a Ltd setup totally does.

Question 3
Following on from question 1 what would the day rate be that you asked if the salary was 120k or 140K equivalent?

Summary
I know I am extremely fortunate to have some passive income - I ve managed to mitigate the tax situation by working outside the UK so my rental income is taxed reasonably in the UK and I earn a perm salary outside the UK (all of this has been calculated planned and structured) but I now do want to come back to London and I just dont understand what sort of pay setup to look for before switching

[northernladuk]

Question 1
So my question is if someone offered you a 100K perm salary, 5% pension, 25 days holiday and you wanted to negotiate not the salary but structuring it as outside IR35 (like the good days) what day rate would that translate to?

You wouldn't because you can't. It's a perm role. There is no way you can turn a perm role in to an outside IR35. It's fundamentally what IR35 is all about. That said there could, hypothetically, be ways and means of doing it but I would expect someone that is capable of doing it wouldn't need to ask the questions you are.

Question 2
If I got paid inside IR35 would that allow me to throttle the salary paid like I can do in Ltd setup? That is the crux of the problem - The passive rental income makes working for anything over 50K ish not really worth it whereas a Ltd setup totally does.

No. It's taxed at source so all salary to you. Maybe some benefits around salary sacrifice but no you cannot change it to suit you.

Question 3
Following on from question 1 what would the day rate be that you asked if the salary was 120k or 140K equivalent?

Irrelevant due to the answer to Q1

I know I am extremely fortunate to have some passive income - I ve managed to mitigate the tax situation by working outside the UK so my rental income is taxed reasonably in the UK and I earn a perm salary outside the UK (all of this has been calculated planned and structured) but I now do want to come back to London and I just dont understand what sort of pay setup to look for before switching

If you have such a large passive income, and I suspect you keep banding the numbers around just to wave your willy like you have in the past, then you have to pay taxes. If you want 75k a year income from your properties then you are gonna have to pay tax on the worked income. Not much more to it than that.

If you really want some elaborate scheme then you might be better asking a tax specialist rather than a bunch of contractors.

But I think this is just another post to blow your own trumpet as usual.

[northernladuk]

If you can convince your new employer to pay gross in to a brolly there are some around that will let you keep 85%+ on it of course

[ChimpMaster]

I went through a similar experience but my thought process was a little different. I do agree you have to think about the money, because there is no point working in a job if most of the earnings go to tax (as would with s24 due to your property income).

I doubt you'll get the client to change to a contract position. It might even harm your offer, if you were to ask them to change to a contract - in their eyes you would appear less committal to the business.

So look at other options.

If you intend on working for much longer (5 years+) then you could look to move your portfolio into a Ltd. There are costs associated with this, you are probably already aware.

Ask the employer if the offer a salary sacrifice scheme, so that you would pay £40k of your pre-tax salary into the pension scheme. This will alleviate a large chunk of the income tax. Could they offer you a slightly lower salary for more holiday entitlement too.

Also, you might want to consider why you want this job. If it's only for the money then you need to re-work your financial situation. If it's for the experience or opportunity, then don't let the tax hit worry you so much for the next couple of years.

And, good luck.

[LondonManc]

Suck it up, pay your tax and quit the humble-bragging.

[mallisarealperson]

Offer to work for half the salary and pay less tax.

Or just pay the extra in tax. A nice place to be in having too much money. and yes I am jealous.

[legal]

You wouldn't because you can't. It's a perm role. There is no way you can turn a perm role in to an outside IR35. It's fundamentally what IR35 is all about. That said there could, hypothetically, be ways and means of doing it but I would expect someone that is capable of doing it wouldn't need to ask the questions you are.

No. It's taxed at source so all salary to you. Maybe some benefits around salary sacrifice but no you cannot change it to suit you.

Irrelevant due to the answer to Q1



If you have such a large passive income, and I suspect you keep banding the numbers around just to wave your willy like you have in the past, then you have to pay taxes. If you want 75k a year income from your properties then you are gonna have to pay tax on the worked income. Not much more to it than that.

If you really want some elaborate scheme then you might be better asking a tax specialist rather than a bunch of contractors.

But I think this is just another post to blow your own trumpet as usual.

I normally don't agree with this monkey but in this case will have to..."just another post to blow your own trumpet as usual."

[northernladuk]

I normally don't agree with this monkey but in this case will have to..."just another post to blow your own trumpet as usual."

What?

[Paralytic]

What?

He's saying you're a monkey and LPM1/NPOUK is blowing his own trumpet.

At least one if which is true. I think we need a poll...

[NowPermOutsideUK]

I went through a similar experience but my thought process was a little different. I do agree you have to think about the money, because there is no point working in a job if most of the earnings go to tax (as would with s24 due to your property income).

I doubt you'll get the client to change to a contract position. It might even harm your offer, if you were to ask them to change to a contract - in their eyes you would appear less committal to the business.

So look at other options.

If you intend on working for much longer (5 years+) then you could look to move your portfolio into a Ltd. There are costs associated with this, you are probably already aware.

Ask the employer if the offer a salary sacrifice scheme, so that you would pay £40k of your pre-tax salary into the pension scheme. This will alleviate a large chunk of the income tax. Could they offer you a slightly lower salary for more holiday entitlement too.

Also, you might want to consider why you want this job. If it's only for the money then you need to re-work your financial situation. If it's for the experience or opportunity, then don't let the tax hit worry you so much for the next couple of years.

And, good luck.

Thank you Chimpmaster for as usual excellent insight and also thank you to northernlad -

I can do salary sacrifise which helps and your point about moving property to LTD is something which I have been working on for a while - People should realise that if they do move property to Ltd they need to pay stamp duty but also capital gains on the market value - That can make it very expensive to move - The only avoidance scheme is if you are outside UK for five years capital gains on residential property on the gain to 2015 is free of CGT in the UK which is valuable