Confusing situation (deemed inside IR35) , Need help

[Newbie09]

Guys, need some help and advice, I am in a very confusing situation. I was working for the last 6 months for a public sector client and was outside IR35. However, my contract is renewing on Friday and the Agency has just sent me a new contract with deemed inside IR35.

They have slashed my rate from £475 a day to £411 per day. I am assuming they are taxing me at source, but the contract is still between my Limited company and I assume they will be paying the new slashed amount £411 per day into my limited company.

Do I operate my company as normal as before i.e. pay Corporation Tax/Personal tax based on the new Income or do I have to pay other taxes too? I have other clients I do personal work for and support through my limited company and don't want to close the company and go with an umbrella. HELP please. I have to sign the contract latest by Friday if I want to continue.

[DeludedKitten]

Tell them that there has been a mistake. If the new role is inside IR35 then the rate needs to increase to cover your losses rather than decrease.

I would start saving up the amount that you should have been paying in tax for the past contract as well, if nothing is changing and the role is now inside IR35. Though HMRC have assured everyone that they won't be going after contractors for things like that, and we know we can trust them...

[northernladuk]

Pick the phone up and speak to them. It's highly unlikely they will let you continue to operate through your limited company so I think there is a whole conversation missing here.

Remember, flipping in to an inside role puts the status of the previous work you've done in jeopardy.

[Newbie09]

Tell them that there has been a mistake. If the new role is inside IR35 then the rate needs to increase to cover your losses rather than decrease.

I would start saving up the amount that you should have been paying in tax for the past contract as well, if nothing is changing and the role is now inside IR35. Though HMRC have assured everyone that they won't be going after contractors for things like that, and we know we can trust them...

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

[Paralytic]

I would start saving up the amount that you should have been paying in tax for the past contract as well, if nothing is changing and the role is now inside IR35. Though HMRC have assured everyone that they won't be going after contractors for things like that, and we know we can trust them...

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

[dx4100]

Not sure why you are asking us ? Speak to the agency....

[GhostofTarbera]

They will be putting £270 a day ish into your personal account


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[MonkeysUncle]

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.

[Newbie09]

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.

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.

[CheeseSlice]

Do I operate my company as normal as before i.e. pay Corporation Tax/Personal tax based on the new Income or do I have to pay other taxes too?

For this one I think you need to ask your accountant.. but after you've squared the situation with your agency as NLUK has said.