IR35 tax code

[Herts47]

Hi everyone

I'm hoping to get some help on my question if that's ok.

I am a limited company and have worked on various contracts during the 2 year's I've been a company. I now find myself working for a public sector company where I've been automatically classed as IR35. I wasn't told this at the time of negotiating my rate (although I'm aware public sector tend to lump everyone as IR35 without assessment, I was told by the agency recruiting for the role I wouldn't be as it was a very short term contract).

The public sector I'm working for have said they haven't been asked to assess me so the agency have automatically assumed IR35 (or the public sector blankets all contractors as IR35 without assessing).

Now here comes the complex bit....

My limited company employs me as the contractor and I pay PAYE to HMRC every month (and VAT of course every quarter). My accountant deducts PAYE off me as the contractor via my company and I as the employer pay tax, NIC's and employer NIC's.

The agency have stated that this particular contract is not with me as the contractor and there is no contract. However, the contract is with my limited company. The invoice raised automatically pays my company the gross rate with VAT. However, me as the contractor is being deducted tax and employee NIC's under IR35.

I've only had 2 payslips but the first was at a rate of BR at 20% and the second which I've just received, is at 50% at a tax code of DO 0. I'm presuming that HMRC in their wisdom think I'm working for both my limited company and the agency now, and as I've not been asked to submit a P45 or P46 to the agency, HMRC have said all my income is taxable at the higher rate. Quite where 50% comes from I don't know, but it could be picking up the previous payslip earnings as well and calculating that I didn't pay enough tax then.

So I've challenged this as at the moment I'm paying nearly 60% to HMRC every week I earn which is ridiculous and I'm not earning anything via my limited company.

My first challenge is that the agency are treating me as an employee by deducting PAYE and I'm therefore entitled to sickness, holiday and pension (which won't happen of course!). Also, they as the fee payer should be paying employer NIC's which hopefully they are doing via RTI to HMRC.

My second challenge is the tax code. The only way to get my 1150 tax code is by issuing the agency with a P45 which means I have to leave my limited company.

My third challenge is therefore that the contract for this role is with my limited company not the contractor, so how can I leave my limited company and be deducted PAYE when the individual isn't effectively on any contract either with the agency or the public sector?!

I'm pretty sure that as I employ me through my limited company and pay over PAYE, I should not be IR35 and therefore be subject to tax on a DO 0 code. I also should not be taxed as an individual by the agency - as that's treating me like an employee, and I don't have a contract with them; only my limited company does.

Can anyone please help me as I'm going round in circles and neither the agency or my accountant knows the answers it seems.

Thank you.

[quackhandle]

So basically you have been working Inside IR35 for past 2 payslips (months?).

Like unravelling rat's nest trying to get the pimp and client to sort out this mess. Life is too short.

Personally I'd walk and go and find another gig outside (IR35) not "outside", like a farmer or dry stone waller.

qh

[northernladuk]

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

[fidot]

My second challenge is the tax code. The only way to get my 1150 tax code is by issuing the agency with a P45 which means I have to leave my limited company.

This isn't the only way. Anyone who has 2 or more jobs can phone HMRC up and ask to apportion their tax code to each employment. So, you should reduce the tax code for yourco to as little as possible (even 0) so that the 1150 is used by the agency.

[pmeswani]

Rule number 1, don't believe everything the agency tells you.
Rule number 2, always get your contract reviewed for IR35.
Rule number 3, don't believe everything the agency tells you.

[northernladuk]

Rule number 1, don't believe everything the agency tells you.
Rule number 2, always get your contract reviewed for IR35.
Rule number 3, don't believe everything the agency tells you.

He's inside with PS.. What does he need a review for?

[Pip in a Poke]

Rule number 1, don't believe everything the agency tells you.
Rule number 2, always get your contract reviewed for IR35.
Rule number 3, don't believe everything the agency tells you.

Yep, that old maxim of what the pimp says he's going to do ain't necessarily actually what he's gonna do.

[CatOnMat]

Yep, that old maxim of what the pimp says he's going to do ain't necessarily actually what he's gonna do.

Also: "what the pimp says he's done ain't necessarily what he's actually done"

[Herts47]

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

Yes I'm employed by my ltd company but I've been deducted PAYE by the agency, so am technically also now employed with them - even though they said the contract was with the ltd company not me. The payslip is for me not my company.

[Herts47]

This isn't the only way. Anyone who has 2 or more jobs can phone HMRC up and ask to apportion their tax code to each employment. So, you should reduce the tax code for yourco to as little as possible (even 0) so that the 1150 is used by the agency.

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.