Contract Advice - Self Employed or Limited Company?

[socialworker]

Legally the op left under a compromise agreement not redundancy. You dont pay tax on payments made under compromise agreements either. I took one last year with legal advice , that's how I know. I would read the terms of your compromise agreement though.

[deeniguy]

Legally the op left under a compromise agreement not redundancy. You dont pay tax on payments made under compromise agreements either. I took one last year with legal advice , that's how I know. I would read the terms of your compromise agreement though.

Yep, my compromise agreement consisted of an ex gratia payment which was entirely tax free, along with the option to exercise stock options offered to me.

So after much research and speaking to HMRC/Accountants/Advisors, i have finally decided to go ahead with the Ltd Co route. I've gone ahead with an accountancy package with 'DANBRO' and registered my company, applied for a bank account etc. Hopefully i'll be okay and stay outside IR35.

[deeniguy]

So my contract does pretty much fall into IR35 since my working hours are like a permie, i don't have any clause in the contract to use a substitute and not really much control in terms of my work. I am now in my 4th week of contracting and have currently setup as a limited company with an accountant.

My question is, what's the worst thing that can happen if i were to be caught? Do i simply pay more tax, say 40-50% or is there a penalty or other charges by HMRC?

Im assuming that my client will also be chased by HMRC in the event that i was caught. Would you advise me perhaps speaking to my ex employer (client) and having them add an addendum to the contract where i can include a clause indicating control, use of a substitute etc?

Kindly advise.

[cojak]

Kindly advise.

If you're inside IR35 and this is your first contract - Go with a reputable umbrella - there are a number of regular posters on here who work for some of them.

Take a look at the Umbrella sub-forum above.

[TheFaQQer]

So my contract does pretty much fall into IR35 since my working hours are like a permie, i don't have any clause in the contract to use a substitute and not really much control in terms of my work. I am now in my 4th week of contracting and have currently setup as a limited company with an accountant.

My question is, what's the worst thing that can happen if i were to be caught? Do i simply pay more tax, say 40-50% or is there a penalty or other charges by HMRC?

You repay the tax and NICs due.

Then - if you were careless, 30% of the tax and NICs are due as a penalty. If you know you are inside and don't pay, and additional 70% penalty is added. If you know you are inside, don't pay, and hide the fact that you didn't pay, an additional 100% is added as a penalty.

Would you advise me perhaps speaking to my ex employer (client) and having them add an addendum to the contract where i can include a clause indicating control, use of a substitute etc?

Adding a sham clause to the contract isn't going to help you now - it's the reality of the situation which counts, not what the paper says. You could help them for future contractors by making them aware of what they could do in the future, but doing anything now for you isn't going to help your case.

If you are caught, then declare yourself inside for this contract and pay the right level of tax. Or walk.

[TheFaQQer]

If you're inside IR35 and this is your first contract - Go with a reputable umbrella - there are a number of regular posters on here who work for some of them.

Bit late now, four weeks into the contract.

[Andrew@Wisteria]

Umbrella vs. Ltd

So my contract does pretty much fall into IR35 since my working hours are like a permie, i don't have any clause in the contract to use a substitute and not really much control in terms of my work. I am now in my 4th week of contracting and have currently setup as a limited company with an accountant.

My question is, what's the worst thing that can happen if i were to be caught? Do i simply pay more tax, say 40-50% or is there a penalty or other charges by HMRC?

Im assuming that my client will also be chased by HMRC in the event that i was caught. Would you advise me perhaps speaking to my ex employer (client) and having them add an addendum to the contract where i can include a clause indicating control, use of a substitute etc?

Kindly advise.

You can still operate the Ltd Co. (even though you are caught by IR35) but there is more admin than an Umbrella. However, you can register for VAT under the flat rate scheme (FRS) thus earning extra £££ (Presumably Danbro can explain this to you are if already signed up to them?)

Valid claimable expenses of the Ltd tend to be more generous than Umbrella so you may be a little better off - depends on your contract rate and FRS %.

Accountancy fees vs. Umbrella fees over a long term (i.e. close to one year) tend to be similar - Umbrella fees based on how many months you use them, whereas Accountancy fees is an annual charge really and not necessarily pro-rated if you only contract for 6 months.

[cojak]

Bit late now, four weeks into the contract.

He's still asking for advice though.

[LisaContractorUmbrella]

So my contract does pretty much fall into IR35 since my working hours are like a permie, i don't have any clause in the contract to use a substitute and not really much control in terms of my work. I am now in my 4th week of contracting and have currently setup as a limited company with an accountant.

My question is, what's the worst thing that can happen if i were to be caught? Do i simply pay more tax, say 40-50% or is there a penalty or other charges by HMRC?

Im assuming that my client will also be chased by HMRC in the event that i was caught. Would you advise me perhaps speaking to my ex employer (client) and having them add an addendum to the contract where i can include a clause indicating control, use of a substitute etc?

Kindly advise.

You can add all sorts of clauses to a contract but if your working practices put you inside IR35 then inside IR35 is where you will be. If you are caught you will have to pay tax owed plus employee's NI owing plus employer's NI plus up to 100% of the amount owing in penalties. You have only been working for 4 weeks so speak to your accountant who will set you up through PAYE and your problem is solved.

[Wanderer]

There are lots of things which are airy-fairy about IR35 but going back to a previous employer is a huge no no because this was the primary reason IR35 was introduced. See the Business Entity Tests to understand more.

I understand that you have had advice from the helpline saying your tax free redundancy payment is safe but I would politely suggest that you keep your head well below the parapet on this one because HM Revenue and Customs may question the tax-free status of the redundancy payment as well as making you pay the tax and up to 100% penalty for being IR35 caught.... Sit tight for this contract by paying yourself as IR35 caught and look for the next one to be a proper business to business one outside IR35.