Confusing situation (deemed inside IR35) , Need help

[DeludedKitten]

So you think that I will have to pay additional income tax on top of the slashed rate?

It depends on what the reason is for the slashed rate. Are the agency actually saying that the new rate is your rate net of employees NI and PAYE, and this is what you'll receive after they have deducted that and paid it for you? You'll have to ask them.

What I'm saying is that if the role hasn't changed and the agency are now admitting that it is inside IR35, then someone will be liable for the wrong determination that you were previously outside IR35. The fee payer will be liable for this, but do not be surprised if the agency try to get money from you to pay it.

If you were with the client before the public sector changes were introduced, and were outside IR35, then I would expect that at some stage someone will need to answer the question of why it was outside before and not inside. At that stage, the liability sat with you, and if you lose that argument then there will be even more tax to pay.

[krytonsheep]

However, my contract is renewing on Friday and the Agency has just sent me a new contract with deemed inside IR35.

Was your particular contract /working practices deemed to be now inside IR35, or is it just a blanket decision?

[MonkeysUncle]

Thanks mate, so that means I will still have to make sure that the payment that comes from this inside IR35 stays separate. Do you suggest this or is it then better to employ an umbrella then so it pays directly into your personal account after all taxes and then I can run my limited company separately.

It depends, if your accounting system and accountant are set up to handle inside IR35 gigs. If not then yes go umbrella and use the LTD for the other income. Also as NLUK said, some agencies wont let you run it through your LTD as they cannot prove you will be taking it as deemed employment. They may say you have to use an umbrella to cover themselves.

Also do not discount what everybody else is saying. You need to first square up exactly why the agency has cut the rate

[Paralytic]

Not sure if the Public Sector is the same, but there are specific rules in the Private Sector on who can be the fee payer. These as effectively rule out the contractor being able to self-administer the deduction of taxes so something else needs to sit between the client and the contractor.

Fee-payer responsibilities under the off-payroll working rules - GOV.UK

As a fee-payer, you must:

• be resident in the UK, or have a place of business in the UK
• pay an intermediary that is controlled by the worker or associate of the worker
• not be controlled, or material interest not be held, by either:
  1. a worker, alone or with one or more associates of a worker
  2. an associate of a worker, with or without other associates
  
  

[ComplianceLady]

1. Do you mean Public sector or Private Sector? If public I feel like you are a couple of years late!

2. If they have deemed you inside and are still paying into your LTD this is still possible...provided your accountant and the system you are using is set up to handle this. i have been in this situation and luckily my accounting system was able to set this up as a deemed payment. This means that the agency will tax you at the source and then the remaining is paid into your LTD. You can then pay that remaining amount to yourself but ONLY as PAYE. You cannot take it as dividend. This income should not affect any other taxes (i.e Corp tax)/.

3. You dont have to close your LTD and can continue supporting other clients in a the normal manner. recommendation would be to not use any of the money gained from these gigs and save this for any business costs (i.e. accountant) as you cant use any income from the Inside gig for this.

Public Sector are undertaking wholesale 'reassessments'. Supposed to be based on revised guidance from HMRC in line with the new CEST but it seems like it's an attempt to level the playing field - i.e. when contractor could disappear to the private sector HMRC accespted a more liberal application of the rules, now they're pushing for a very HMRC-tinted view of assessment.

[MonkeysUncle]

Public Sector are undertaking wholesale 'reassessments'. Supposed to be based on revised guidance from HMRC in line with the new CEST but it seems like it's an attempt to level the playing field - i.e. when contractor could disappear to the private sector HMRC accespted a more liberal application of the rules, now they're pushing for a very HMRC-tinted view of assessment.

Ah I wasnt aware of this.
Interesting to know

[Paralytic]

Public Sector are undertaking wholesale 'reassessments'. Supposed to be based on revised guidance from HMRC in line with the new CEST but it seems like it's an attempt to level the playing field - i.e. when contractor could disappear to the private sector HMRC accespted a more liberal application of the rules, now they're pushing for a very HMRC-tinted view of assessment.

That statement really does sum up the farcical nature of this legislation. HMRC have effectively been deciding to which extent they would apply it based on the impact it would have had on the public sector.

[simes]

No they haven't. They've put some very carefully selected words in writing that don't actually commit to anything very much.

When Deluded Kitten commented, "Though HMRC have assured everyone that they won't be going after contractors for things like that", and later opined, I think it is safe to say she was being sarcastic, as hinted by the very droll and dry, "and we know we can trust them."

HTH.

[Paralytic]

HTH.

I wasn't seeking any help, but thanks anyway