IR35 tax code

[Herts47]

Try explaining to a permie on £40k why your £100k is not fair.
You’re right that it’s not good legislation but you do (should) get much more gross salary.

I was adding on costs to an employees gross salary, so your £40k is much more with benefits, pension etc, plus bonus. Yes a contractor gets it gross but if you take this off the contractor (who has to fund this themselves plus insurance, accountants, corp tax etc) - a like for like salary between an employee and contractor on the same role (and within IR35) means the contractor will now be worse off.

It's the contractors choice of course but I think it's a shame the Government have introduced this legislation with no thought - and despite reservations from small businesses and tax experts. If you pick the legislation and contract law apart there are so many holes and IR35's are employees - whether it's hidden by agencies or not, and should be treated as such. An employee being treated the same could easily win in a tribunal as the legislation is discriminatory.

[fidot]

That sounds good - thank you. Only thing is I'm reluctant to go through hours of hanging around to speak to HMRC and I certainly don't want them burrowing into past contracts. Not that I've got anything to hide as everything is done by my accountant, but I don't want to highlight me to them if you know what I mean.

I understand that, but you just say I have 2 employments and I wish to allocate my tax code between them. You don't even have to mention being a contractor/freelancer etc. This is quite normal for people with multiple employments and so I don't see that you risk putting your head above the parapet.

[Herts47]

I understand that, but you just say I have 2 employments and I wish to allocate my tax code between them. You don't even have to mention being a contractor/freelancer etc. This is quite normal for people with multiple employments and so I don't see that you risk putting your head above the parapet.

I've contacted HMRC via online website and saw I had a K code on my limited company and a BR x code on my IR35 agency. The problem with IR35 is now clear to me: They "presume" I will earn what I've earned so far on my limited company for the whole tax year and also the agency IR35 income for the year. they therefore think I have 2 incomes and have exceeded my personal allowance so now owe them. It's a crazy scenario to assume earnings for the whole year and tax you on it without you having earned it yet. Another contractor I've spoken to has had exactly the same thing happen to them.

IR35 needs to be sorted out as there must be so many others being stuffed for tax due to the assumptions of HMRC - especially when you are registered for PAYE anyway as I am, and employ myself through my limited company. I get that IR35 was invented to catch contractors who didn't pay PAYE and drew dividends, but I've always been PAYE on my company and you end up getting slaughtered tax wise. I've now said I am not going to be earning anything else from my company for the rest of the tax year, and my code changed immediately - but didn't go onto the IR35 agency - so they just took away most of the personal allowance from my limited company annual allocation and haven't put it anywhere else. I then completed a form to ask that my personal allowance goes onto my IR35 agency and it apparently takes 3 weeks to process (although they are damn quick to adjust the tax code when they think you owe them money). The whole thing is a shambles.

And incidentally, the agency have backed away from all responsibility of informing the limited company what happens with IR35. They refused to accept the Starter Declaration C Form (technically the P46) as I'm a PSC, and said I have to sort out my own tax situation. If they had put through this form in the first place my tax code would have been sorted out and HMRC would have known I was only on one income. The lack of understanding about IR35 is awful - and this is a very prominent agency.

[m0n1k3r]

Is the fact that you aren't employed by your LTD causing some confusion here?

If he does other things for his limited company other than just managing it (such as doing stuff for clients), then he is most certainly employed by the company.

https://www.gov.uk/employment-status/director

[northernladuk]

If he does other things for his limited company other than just managing it (such as doing stuff for clients), then he is most certainly employed by the company.

https://www.gov.uk/employment-status/director

Most certainly? That article says may be so depends on other things, one of those would be a contract of employment.