Help Required: IR35 neglected

[malvolio]

Jeez, you're really prepared for this, aren't you?

Just as an aside, even if you are IR35 caught (and 99% of people who think they aren't), you will still take home more money working through your own limited company that any ethical umbrella. There's nothing magic about IR35, it doesn't change corporate structures or anything, it merely imposes an unfair but nevertheless simple to understand (even for you) tax treatment. And since as a result you won't make a profit, you won't pay any CT either or have anything left for dividends. And before you ask, VAT isn't your money.

So go find an accountant and let an expert sort you out before you end up in court.

[djhns]

No the company doesn't run at a loss, if IR35 caught then you simply have less money to pay yourself because of the additional NI and Income Tax on salary rather than dividend payments.

Hi TykeMer thanks for that.

For simplicity example: I originally had

Service Income: 50,000
Salary exp: -5,000
Admin exp: -15,000
Net profit = 30,000
Dividend -30,000

How do i report the new P+L for the Ltd co. under IR35 now? much appreciated.

[djhns]

Jeez, you're really prepared for this, aren't you?

Just as an aside, even if you are IR35 caught (and 99% of people who think they aren't), you will still take home more money working through your own limited company that any ethical umbrella. There's nothing magic about IR35, it doesn't change corporate structures or anything, it merely imposes an unfair but nevertheless simple to understand (even for you) tax treatment. And since as a result you won't make a profit, you won't pay any CT either or have anything left for dividends. And before you ask, VAT isn't your money.

So go find an accountant and let an expert sort you out before you end up in court.

Correct me if i'm wrong, but isnt the whole point of IR35 is to catch people (who could have been paid directly throught the client and there for subject to full PAYE and NI) going through Ltd companies and thus reducing the amount of PAYE and NI contributions???

[malvolio]

Correct me if i'm wrong, but isnt the whole point of IR35 is to catch people (who could have been paid directly throught the client and there for subject to full PAYE and NI) going through Ltd companies and thus reducing the amount of PAYE and NI contributions???

No, the whole point of IR35 (officialy) is to stop people being transfered from permie to freelance for the same client, so losing all their employee benefits, saving the client several thousands a year in overheads and being able to sack them on a whim. It sort of mutated into just another unfair tax grab and you have clearly fallen for Dawn Primarola's propaganda.

You are outside IR35 if you can show a lack of Direction and Control, or an absence of Mutuality, or if you are allowed to send in a substitute.

You could do worse than read the First Timer guide on this website and go visit the PCG website. But my first suggestion stands - get professional guidance now.

[Emigre]

And of course HMRC will give the answer that favours themselves!

£75 + VAT is not really a lot of money if it saves you hundreds in extra tax and NI.

thousands

[djhns]

No, the whole point of IR35 (officialy) is to stop people being transfered from permie to freelance for the same client, so losing all their employee benefits, saving the client several thousands a year in overheads and being able to sack them on a whim. It sort of mutated into just another unfair tax grab and you have clearly fallen for Dawn Primarola's propaganda.

You are outside IR35 if you can show a lack of Direction and Control, or an absence of Mutuality, or if you are allowed to send in a substitute.
.

Thanks Malvolio for you input.

So the whole point of whether i am considered under IR35? Let me give you my contract terms:

Basically, I work as an analyst in financial services. I have pretty much set hours say 9-6 every day, i am given a workstation, i am provided with all the equipment to do my job just like the permie guy sitting next me. They have taken me on for my services only and i cannot ask my friend who has the same qualification and experience or anyone else for that matter to come in as a subsitute if i was unable to work. Ok, so i'm on a contract rate so i don't enjoy all the benefits of a permie. All that aside, i wouldbe been seen as just another employee of the end client.

Does that now justify that this would be caught under IR35?

I have decided to ditch the professional opinion to tell me that would be caught under IR35 as i already know.

I am now in the process of engaging an accountant to assist with the adjustments of all my accounts.... eeeks!

thanks.

[dx4100]

....

[TykeMerc]

Hi TykeMer thanks for that.

For simplicity example: I originally had

Service Income: 50,000
Salary exp: -5,000
Admin exp: -15,000
Net profit = 30,000
Dividend -30,000

How do i report the new P+L for the Ltd co. under IR35 now? much appreciated.

If IR35 caught then you pay the 30k dividend back to the company and draw it as salary while paying the appropriate tax and NI. Admittedly you could be in hot water if you've drawn dividends inappropriately in past years, but if it's in this financial year it's basically an accounting exercise to correct. You need proper advice on how to do that as I'm not an accountant or tax lawyer.

[gadgetman]

djhns - are you for real (serious question)?

You seem to have no clue how the system works but apparently are clued up enough to prepare your own accounts.

Your posts sounds like an attempt to scare people into going down the IR35 route to me.

[Ardesco]

Thanks Malvolio for you input.

So the whole point of whether i am considered under IR35? Let me give you my contract terms:

Basically, I work as an analyst in financial services. I have pretty much set hours say 9-6 every day, i am given a workstation, i am provided with all the equipment to do my job just like the permie guy sitting next me. They have taken me on for my services only and i cannot ask my friend who has the same qualification and experience or anyone else for that matter to come in as a subsitute if i was unable to work. Ok, so i'm on a contract rate so i don't enjoy all the benefits of a permie. All that aside, i wouldbe been seen as just another employee of the end client.

Does that now justify that this would be caught under IR35?

I have decided to ditch the professional opinion to tell me that would be caught under IR35 as i already know.

I am now in the process of engaging an accountant to assist with the adjustments of all my accounts.... eeeks!

thanks.

Not enough information.

Does your client dictate exactly what work you do, and how you do it? Or is there a list of jobs that need to be completed, and you pick up the jobs you want to to and get on with them by yourself.

You are very unlikely to go into a company and not be set up with a computer/phone/etc. Putting my sys admin hat on, there is no way I would let some random contractor come and put a machine on my network that is not configured the way I want it configured, and does not have the anti virus software that I want on it.

Due to network security you will hardly ever be allowed to use your own machine, it's too big a risk for the person administering the network you would plug it into (and this has nothing to do with IR35).

Not having a substitution clause does not automatically mean you are IR35 caught, just as having one does not automatically mean you are not IR35 caught.

I think one of the big problems here is that you have a permie mindset and generally seem scared to be a contractor. Join the QDOS freelancer club, you'll get three free contract reviews a years for around about the same price as one professional review.