IR35 defeat costs IT contractor £99,000

[beaker]

Jeez are you still ALL making this basic mistake. The effect of ERNI is not additive.

The total of 13% ERNI, 20% tax and 11% EENI is 40.7%
and 13% ERNI, 40% tax and 1% EENI is 47.7%.

tim

Not sure how you worked this out, but that means take home is now £56,645

[Bumfluff]

I had calcs from accountant for if I was inside IR35 and it did work out to be approx 53-55% take home depending on expenses etc, the figure is slightly distored though by the fact majority of salary would be would be a 40%.

And as for packing contracting in I'm getting close.

[max]

And as for packing contracting in I'm getting close.

Got a better plan...do tell!

[Bumfluff]

Got a better plan...do tell!

Going Permy, serious, I'm lucky the sector I work in pays well in fact middle management role would pay near on £100k + salary and bonus.

[dude69]

Going Permy, serious, I'm lucky the sector I work in pays well in fact middle management role would pay near on £100k + salary and bonus.

but contractors get more than £100k, plus lower tax....

[Denny]

The point about RoS is that if you have a genuine unfettered RoS to enable you to nominate someone else to do your job for the day/week/month, then case law has established that this single fact stops you being an employee and you have the magic bullet, get out of IR35 card.

The case law was established using basic skilled workers who could easily find a qualified sub.

However, in a technical consulting role, even one of generic skills, there is always that little extra skill that you have that the suggested sub does not have.

So, in order to try and fit an RoS into contracting contracts people have come up with terminology that the client will acept, that pretends to be an RoS but which is often so full of holes that in practice it isn't - by which I mean, it may be a valid right, but not one which is strong enough to be the magic bullet and as an IR35 pointer is as worthless as not haiving one at all.

And when these clauses are presented to the IR, sometimes they accept them as an IR35 get out and sometimes they don't.



There is no 'defence' to not having an RoS. If it's impractical, you don't have one, end of.

tim

It's not just one man band contractors who face this problem, so do growing consultancy companies. I have on many occasions gone directly to a bigger concern that needs my own specialist services to help them on a project they are supplying for to the end client, but found that the end client actually wants to interview me first as I will be, on occasions, using a site pass to access their building and meet with stakeholders. That means that the consultancy company I was directly engaged to did not have an unfettered right of substitution either.

Yet when I got in a supplier for a special project for an end client, I was solely charged with managing all aspects of the hiring, D&Cs over the final product they were charged with and the end client did not even meet them. I've done this a few times.

Another thing: it is perfectly possible for employees to get in a substitute, temporary, depending on what sort of employee they are. You've all the heard the term 'minding the shop.' . Sometimes that can mean someone who is not even employed by the same company but is a friend or relative of the employee who is going to be temporarily absent. Not very commonplace in larger company offices, I know, but still done.

This whole RoS thing defining whether someone is a business or de facto employee is crazy.

[Bumfluff]

but contractors get more than £100k, plus lower tax....

True, but I could earn more as permy and my rate aint cheap

[max]

True, but I could earn more as permy and my rate aint cheap

Ok..so a non cheap rate would be, say £800/day, if you work hard , you make £208,000. An estimate of tax to pay..say 25%, so £150,000 after tax.

The salary + bonus to make more than that £254,000

Is that what you're looking at?

For your £100,000+say 20% bonus, you'd need a daily rate < £350/day to make the permi job pay better.


http://www.contractoruk.com/money/pa...alculator.html
http://www.sjdaccountancy.com/contra...tor/index.html

[Bumfluff]

Ok..so a non cheap rate would be, say £800/day, if you work hard , you make £208,000. An estimate of tax to pay..say 25%, so £150,000 after tax.

The salary + bonus to make more than that £254,000

Is that what you're looking at?

For your £100,000+say 20% bonus, you'd need a daily rate < £350/day to make the permi job pay better.


http://www.contractoruk.com/money/pa...alculator.html
http://www.sjdaccountancy.com/contra...tor/index.html

25% mmm I not sure if that takes into account SA tax, more realistic is 66%-70%

[tim123]

Not sure how you worked this out,

Because you have to add the ERNI back onto the base figure, before working out the percentage.

so you pay approx (40 + 1 + 13)/(100 + 13) (*100)%

(It's actually 12.8 not 13.)

HTH

tim