Inside IR35 (what would you do?) Opinons greatfully received

[scottylowe]

Hi there, apologies if this question has been answered elsewhere, I spent an hr looking and couldn't find it. I would be interested to know your views as I know that this Umbrella\LTD company debate is always controversial.

I am inside IR35, I have worked on the same site, in the same role, for 4 years. They want to extend my contract for 12 months. I earn between 250-500 a day.

The only options I can see are as follows:
Umbrella Company: I cannot claim any travel or subsistence so my return will be about 58%
LT company: Because I am inside IR35, I cannot pay dividends etc so I imagine my returns would be similar or worse than Umbrella once accounting fees are included.
EBT scheme: I could go to a EBT salary scheme which can offer me an 84% return, £18,000 salary and the rest in interest free loans. my worry with this is the increasing retrospective application of tax law changes that this government is currently following.

What would you do in my situation?

Thanks

[BolshieBastard]

You're not inside ir35 just because you've worked on the same site for 4 years, there will be other factors such as how integrated you are in the clients organisation.

I'd suggest getting your contract and working practices reviewed. You may be outside ir35 although only HMRC \ SSC can truely determine that.

Personally, I'd never use a brolly so even if ir35 caught, Id go ltd. You're still better off.

[Alan @ BroomeAffinity]

Change your contract and working practices so that you do not get caught under IR35 and then set up your own company.

[Archangel]

With a Ltd company you can claim 5% of the income as expenses/dividends and the rest is treated as salary.

You can gain some gross by using the fixed rate VAT scheme (probably enough to pay your accountant fees)

You can't do the above with a brolly.

I'd go Ltd every time.

(and 4 years does not equal IR35! (I was investigated after 6.5 years and passed))

[jmo21]

what are you currently doing? are you permie just now?

[Hex]

There's a sticky at the top of this forum which starts with "Should I trade as ..." which compares the options in some detail.

[DonkeyRhubarb]

7 years ago I joined the Montpelier/MTM scheme. I left in 2004 after 3 years in the scheme. As you are no doubt aware, in this year's budget the Government changed the law retrospectively. We are now embrolied in a legal battle with HMRC which will probably go on for many more years.

With the benefit of hindsight, would I still have joined? Possibly not, although I didn't spend the money, and I am actually quite enjoying taking on the establishment.

Ironically, even if we eventually win, HMRC will still have got what they want by using us as an "example" to put people like you off using schemes. In fact, I wouldn't be surprised if this was their primary motive all along.

Like you, my working practises were definitely iffy with regard to IR35. Possibly 7 years on with the likes of Qdos I could have massaged the contract to make it more ir35 friendly but this still carries a risk.

Looking back the only other thing I might have done was to carry on inside IR35 but put as much as I could into a pension to claw back the tax. This is the only 100% safe way of avoiding tax.

[TheFaQQer]

Whatever method you choose, you can't claim the travel and subsistence as you're way over the two year rule.

If you've been paying IR35 up till now, personally I would be wary about suddenly stopping paying it when you are on the same contract. You might be able to argue that it's different in terms of working practice etc. than before, but I wouldn't want to be using that defence.

I'd look for a new contract at the top end of your rather vague £250-£500 a day range, outside IR35, and work through my own Ltd. If it was at the lower end of that range, then I would probably go umbrella (or permie).

[Ardesco]

1. Umbrella Company: I cannot claim any travel or subsistence so my return will be about 58%
2. LT company: Because I am inside IR35, I cannot pay dividends etc so I imagine my returns would be similar or worse than Umbrella once accounting fees are included.
3. EBT scheme: I could go to a EBT salary scheme which can offer me an 84% return, £18,000 salary and the rest in interest free loans. my worry with this is the increasing retrospective application of tax law changes that this government is currently following.

1. You can't claim travel and subsitence anyway, and you haven't been able to since you knew you were going to be working there more than two years. If HMRC catch you , you are in for a big rogering.....
2. IMHO the only way to contract. You'll get a 5% allowance that you can use for training, but you are going to be paying a lot of tax....
3. Much of a gambler? If you are go for it, all you have to lose is a large chunk of your money when they decide to change the rules and then come and get you for the past X years.....

I would go and get a new job.

[thunderlizard]

I don't understand why this question has come up now. If you've been contracting 4 years already, what setup do you use presently and what's wrong with that?

anyway...

If you want to be contracting for a long time, use Ltd. You've got a choice between controlling your own finances, or having somebody else do it. Why choose the latter? With a Ltd, there's nobody stuck in the middle who can go bust owing you money, or make you fill out all sorts of forms to get at it. The only clued-up contractors I know who take the umbrella route are ones who have a specific reason why they can't easily be company directors.