NI payments

[neil987]

Hello,
I am a new contractor and looking at the ins and outs of going limited.

I know that as limited outside IR35, I could draw a salary of say £6K, pay no National Insurance contributions, pay 20% Income Tax on the salary, and then Corporation Tax on the rest.
I am not a higher rate payer, so the difference in Income Tax and Corporation Tax would be negligible.
Therefore, I am saving the employers and employees elements of National Insurance by going limited instead of using an umbrella company.

The question I have is if I get caught by IR35 by an investigation by the tax man.
I understand, I think, that this makes me a disguised employee in such circumstances.
If I have been paid a fee per day, which would be presumed to be a wage or salary in these circumstances, who would be responsible for the employers National Insurance payment?
My thinking would be either the agency or client since the tax man has just shown that I am an employee of someone to put me inside IR35.

Any advice would be appreciated.

[Hex]

Your limited company would be responsbile for paying the Employer's NI. The Agency and Client would not be liable.

IR35 looks through the limited company you use to contract and tries to determine if you are effectively an employee of the end client. If it finds you are, your limited company is the one that has to do the deemed payment calcs which means effectively paying you PAYE for 95% of the income it receives on that contract. As your company pays the money PAYE, it pays the employer and employee NI.

[Jaimesjdaccountancy]

Hello,
I am a new contractor and looking at the ins and outs of going limited.

I know that as limited outside IR35, I could draw a salary of say £6K, pay no National Insurance contributions, pay 20% Income Tax on the salary, and then Corporation Tax on the rest.
I am not a higher rate payer, so the difference in Income Tax and Corporation Tax would be negligible.
Therefore, I am saving the employers and employees elements of National Insurance by going limited instead of using an umbrella company.

The question I have is if I get caught by IR35 by an investigation by the tax man.
I understand, I think, that this makes me a disguised employee in such circumstances.
If I have been paid a fee per day, which would be presumed to be a wage or salary in these circumstances, who would be responsible for the employers National Insurance payment?
My thinking would be either the agency or client since the tax man has just shown that I am an employee of someone to put me inside IR35.

Any advice would be appreciated.

Hi neil987
I would be happy to take a look at your contract for you and offer you some further advice on IR35. Feel free to PM or call me 0500 152 500.
Jaime

[SueEllen]

Hi neil987
I would be happy to take a look at your contract for you and offer you some further advice on IR35. Feel free to PM or call me 0500 152 500.
Jaime

Oh dear.

[neil987]

Re NI

Thanks for that.

My confusion was as to the employment status in general if the tax man declared a contract was inside IR35.

Obviously, there is no dispute that I work for my ltd company.

I was confused because it seems that I as the contractor would be penalised into paying both lots of NI payments for signing a contract that put me inside IR35 and therefore a disguised employee of the client, but the client pays me a daily or hourly rate for the time I work, but pays no holidays, sick pay, employers NI etc.

It seems that the client "knows" the score on this, but gets away financially free if the tax man comes calling. I take it that it would be a very naive agency or client that didn't appreciate this fact.

[LisaContractorUmbrella]

If you are found to be inside IR35 you instantly become both employee and employer, as such you will be liable for both employee's and employer's national insurance as payment of both is a legal requirement. You would effectively become a 'disguised employee' of your own limited company because your working practises give you little or no control.

If you work outside of IR35 and HMR&C subsequently find that you are actually inside you would be liable for the difference in tax paid and tax owed and you could also be liable for interest and penalties.

HTH

[xoggoth]

The assumption is that the client is paying you enough above an employee's salary to cover things like employer's NI, he is just passing the money and responsibility to your limited. If you check your rate vs an equivalent employee's salary that's probably true.

Quite true also that the IR35 formula fails to take account of many major hidden perks an employee of the client's company might get, like all his admin done for him, pension reviews etc but hell, a New Labour policy is only going to be "fair" to the useless. That's socialism.

As I am sure I have said before, the man we need in charge is Vlad the Impaler, he invited all the beggars and cripples in Transylvania to a banquet in a big hall. While they were all partying away he had the doors barricaded and the place torched. Why can't we have a Tory leader like that?

PS To any lefties on CUK this is merely a joke.
PPS No it isn't.