Invoicing Agency POST Inside IR35 via Limited Company

[225c]

I have been speaking to Capita about this for a couple of weeks, needless to say their responses are not exactly helpful.

Firstly they told me if I stayed at the PS organisation they would deduct 25% as a "secondary jobs tax rate" which clearly doesn't exist.

Someone else then told me they would deduct the equivalent of basic rate tax and NI from the day rate and the remainder would go to my Ltd company. Fine I said but asked how they will present the money they deducted to HMRC? As I do not work for Capita directly how can they pay HMRC tax on my behalf? Also if my Ltd company still receives money but minus the amount Capita deducted it would require a new contract would it not, also my company would still have to then pay corporation tax on the income still.

They response back was well come and work for us directly or use an umbrella.

Anyone else had any form of "clarification" ?

[LondonManc]

I have been speaking to Capita about this for a couple of weeks, needless to say their responses are not exactly helpful.

Firstly they told me if I stayed at the PS organisation they would deduct 25% as a "secondary jobs tax rate" which clearly doesn't exist.

Someone else then told me they would deduct the equivalent of basic rate tax and NI from the day rate and the remainder would go to my Ltd company. Fine I said but asked how they will present the money they deducted to HMRC? As I do not work for Capita directly how can they pay HMRC tax on my behalf? Also if my Ltd company still receives money but minus the amount Capita deducted it would require a new contract would it not, also my company would still have to then pay corporation tax on the income still.

They response back was well come and work for us directly or use an umbrella.

Anyone else had any form of "clarification" ?

At it's simplest, the fact that you are deemed inside IR35 means that you are deemed as an employee of Capita for tax purposes. Let's ignore that you have no actual employment rights for now; essentially your tax is Capita's responsibility.

The push for contractors to move to umbrellas is because the PSB, the consultancy firms like Capita and the agencies don't want to have to start managing all these extra tax calculations on your behalf.

I can see this ending with fixed term contracts where you go on-payroll with the PSB being the norm. At the very least you'll save your umbrella fees (sorry Lucy!)

[lucyclarityumbrella]

At the very least you'll save your umbrella fees (sorry Lucy!)

But you will have no employment rights like you would if you went through a brolly

[lucyclarityumbrella]

As I do not work for Capita directly how can they pay HMRC tax on my behalf?

If they are making the deductions, they will have to do this through their payroll, at this point in means those taxes will be reported via RTI (Real Time Information) direct to HMRC.

[Andy Hallett]

My agency is telling me to invoice them the amount that they will actually pay my company (e.g. my day rate minus employers NIC and apprenticeship levy). This would also mean the payment amounts would match up in my accounting software.
Then I pay myself this via PAYE.

I suspect your agency is in for a tough year.

[LondonManc]

I suspect your agency is in for a tough year.

Credit check needed?

[RonBW]

I suspect your agency is in for a tough year.

It might be a bit easier for them if they are trying to take an extra 14.5% from the contractor though. Knowing some agents, they'll take it from the client too...

[ntdmr]

Nope the agency will do the PAYE bit. So your invoiced value of £437.45 will be about £271.83 to your limited company to cover employees NI and Tax.

If you are VAT registered you will probably need to add the 20% (addition £87.49) and then pay HRMC £86.61

If I was going to do a contract inside IR35 I would do that contract under a umbrella and keep the limited company for my next outside gig.

My agency doesn't run PAYE as far as I know. My contract will have my rate (£500), Somewhere in my chain the employERs NIC and apprenticeship level is paid on my behalf from my rate, and then the remainder comes to me, which I will then have to put through my own limited companies PAYE to pay myself?

My chain is Me -> Agency -> REED -> Public Sector Client

"Based on the assumption that your role will fall inside of IR35 come April 2017 – should you continue to work through your PSC we would expect your day rate to be reduced to £XXX (approximate figure – we will confirm this exact figure closer to the time). You would invoice us per day at this rate and prior to making payment to you the necessary NI and Tax will be deducted at source by XXXX. Based on a full month worked the approximate take home under this method would be: £XXXX" - from my agent

If I go umbrella I lose the ability to charge VAT?

[northernladuk]

If I go umbrella I lose the ability to charge VAT?

Why is this a factor?

[RonBW]

My agency doesn't run PAYE as far as I know. My contract will have my rate (£500), Somewhere in my chain the employERs NIC and apprenticeship level is paid on my behalf from my rate, and then the remainder comes to me, which I will then have to put through my own limited companies PAYE to pay myself?

No, no, no - this is where you need to push back.

When deducting NI and PAYE, the agency is NOT allowed to deduct it directly from your rate - same for the apprenticeship levy. The only things (!) that they are allowed to deduct from your invoice (unless you agree in the new contract) are employees NI and PAYE.

The agency may well attempt to charge you an additional fee which happens to equate to employers NI and the apprenticeship levy but they cannot deduct it from your rate / invoice directly.