Very, very, very urgent IR35 advice needed please!!

[VectraMan]

If a LTD company takes on a contractor ( who is a sole trader ), if IR35 requires more tax to be paid, then HMRC chases the LTD company who employed the contractor.

If the contractor doesn't pay his taxes then yes there's a risk they'll decide the "employer" is responsible, which is a big part of the reason why nobody ever works as sole traders.

But that's not to say it's anything to do with IR35. IR35 (for the most part) is aimed at people using Ltd. companies to avoid paying as much tax as they would as an employee whilst doing the same job as an employee (and especially people who leave their permanent jobs and return as Ltd company contractors). As a sole trader I don't see how it matters as you won't gain much by being in or out of IR35.

If this is your old employer, there's little point you being a contractor anyway as there's a real risk all the old employment obligations will still stand: redundancy, sick pay, holiday pay, maternity leave (if you're that way inclined) and being responsible for deducting your tax at source, and companies hire contractors to avoid all that. Could be good for you of course, but you're playing them for fools.

I think your best bet is to join one of the honest umbrella companies like Parasol and put your sole trader business on hold.

[Zippy]

Not confused, I just dont know..


If a LTD company takes on a contractor ( who is also LTD company), if IR35 requires m or tax to be paid, then HMRC will chase the contractor.

If a LTD company takes on a contractor ( who is a sole trader ), if IR35 requires more tax to be paid, then HMRC chases the LTD company who employed the contractor.

I am sorry if I come accross as confusing, but if abnyone knows if the above statements are correct, please let me know.

Regards.

Nip over to the Accounting/Legal board and have a look at the stickies at the top. You really may be better off either forming a ltd or joining an umbrella. You can always email or call one of the 'local'/board accountants for some advice and it shouldn't cost you much - may even be free.
HMRC will come after anyone that they think owes them tax and whilst being a sole trader/'self employed' makes it more transparent all round you can't be the most tax efficient(NI etc.). HMRC will also come after the softest target (clue - that'll be you).

It seems that you are a bit overwhelmed by these new developments but don't worry - despite all the p!ss taking, the folks on here are generally pretty helpful (HMRC can be helpful too). You have time to read all the advice, swat up a bit on taxes, think about your contract and make an informed decision.

[530iM]

OK, I wish to keep being a sole trader so I can still take on jobs outside of working hours.

I am not trying to fiddle the system at all..I just want to ensure that the required taxes are paid.

As a Sole Trader, are you people syaing that IR35 will not come into effect?

Thanks.

[530iM]

"HMRC will also come after the softest target (clue - that'll be you)."


That is what I thought.

Therefore I am better off negociating a better hourly rate, knowing that I will ultimately be liable to pay the extra tax demanded.

[530iM]

I have been aware of the implications of IR35 since it was introduced, however it has never affected me while I was in full time employment.

I will be staying as a Sole Trader, so I would really appreciate any help regarding IR35 and the Sole Trader.

Thanks.

[hattra]

All that IR35 means is that, if you run your own Ltd Co, and are deemed to be in disguised employment, you pay the full whack of PAYE and NI (plus the employers NI) on all your income.

If you are a sole trader, I guess that you declare yourself as self-employed to HMRC, and you pay all the tax and NI that you would normally pay as a self-employed person. However, if you don't pay, then your client is in a very weak position, and can be chased by HMRC for any unpaid tax and NI, if they have no luck getting it out of you.

If you set yourself up as a Ltd. company, then you can declare some of your earnings as a dividend, and save yourself the NI contributions (you will however pay both employers and employees NI on what you do declare as PAYE income. In this case HMRC will chase YOU if you don't pay the tax and NI, and your client is protected.

If you want to give yourself some time to find out more, sign up with an umbrella/ composite company -if they are a reasonable company, they will assess your contract for whether its caught by IR35, and either pay you everything as PAYE if you are caught, or pay some as PAYE & some as dividends if you are not. You can sign up for a few weeks only if you want, most have no minimum period. However, the law relating to umbrella companies looks as if it will change shortly i.e. by April 2007, and all income will be treated as caught for IR35 purposes. Hopefully by then you will have a clearer idea of which path you want to follow.

You can still take on other work if you want to - it's a good indicator for being outside of IR35

[VectraMan]

Therefore I am better off negociating a better hourly rate, knowing that I will ultimately be liable to pay the extra tax demanded.

You'll always be better off negotiating a better hourly rate.

[530iM]

OK.


I am going to a meeting tomorrow to decide on rates etc.

They are fully aware I am a Sole Trader, so I should just get the best hourly rate I can, and pay my taxes as normal.

I was just worried that if I got a higher rate, and I had to pay the IR35 tax, then I wuld be worse off than if had taken a lower rate and the company paid the IR35 defecit.


From what you lot have told me, by being a Sole Trader, I am paying the required Tax/NI anyway....even though I only pay £26 per quarter NI?????

Please Help

[hattra]

OK.


I am going to a meeting tomorrow to decide on rates etc.

They are fully aware I am a Sole Trader, so I should just get the best hourly rate I can, and pay my taxes as normal.

I was just worried that if I got a higher rate, and I had to pay the IR35 tax, then I wuld be worse off than if had taken a lower rate and the company paid the IR35 defecit.


From what you lot have told me, by being a Sole Trader, I am paying the required Tax/NI anyway....even though I only pay £26 per quarter NI?????

Please Help

Exactly - you are already paying tax & NI on whatever you earn. As a sole trader, you don't pay dividends, so IR35 isn't a factor. It might be worth your while actually phoning Hector's advice line and running the facts past them, but I think they'll confirm that IR35 is not a factor in your case - you are simply a self-employed person taking on another job with a client.

And if you only pay £26 a quarter in NI, negotiate a better rate

[Zippy]

OK, I wish to keep being a sole trader so I can still take on jobs outside of working hours.

I am not trying to fiddle the system at all..I just want to ensure that the required taxes are paid.

As a Sole Trader, are you people syaing that IR35 will not come into effect?

Thanks.

Nobody on here is out to fiddle the system - most folks just want to minimise what is due legally (despite the bluster and bravado ). And you don't need to be a sole trader to take on other jobs. Seriously - think about a ltd and all the legitimate tax breaks you can get. You can always pay someone to manage the books/do the payroll for you and it would almost certainly pay for itself in the tax savings. The paperwork would be no worse than being a sole trader (I've been there!)

You can get advice about structuring your work to fall outside IR35 so just take a look at all the options. It very much goes in your favour that you are looking at other work so it sounds to me like you looking to form a real business.

Good luck!