Silence and then client co and agency are saying this. what do i do

[platforminc]

Hi All.

I have not been here for a while, so please be gentle with me.

I am engaged by a large blue chip company, with regards to the IR35 reforms, they have kept quiet all this while, up until recently when an email went out to all contractors saying they have 3 options.

Payroll
Umbrella
PSC with deductions.

The clientCo also specified a list of umbrellas that they have approved for use.


so basically the clientco has put us all inside IR35 which is wrong, but i am not here to argue about what is right/wrong. The agency called this week to give me the options and then said there are rumours that the clientCo will be paying the employers NIC and that i would only be worse off by 5- 10% once the clientco pays the emplyers NIC.

I have a question, i have been reading up about a salary sacrifice option where significant chunks of money can be put towards a pension, if one goes with this option, who will manage the pension and who makes the decisions as to how funds for the pension are invested ?

He further went on to say that this is not in writing yet so no guarantees, it also got me thinking it could be a lie and a ruse to get me to be under them and not use an umbrella etc. I then put it to him that it looks suspicious if one minute, I claimed to be outside IR35 and next minute I accept being inside IR35, same client, same role. He said yes its a risk and that HMRC do not have the manpower to launch investigations. I am not convinced, and would feel very uncomfortable taking this option.

It also got me thinking, if a new company is formed and a new contract signed with the agency and that company is inside IR35, does this change anything ?

[ladymuck]

There is no benefit to be had from forming a new company.

If you have a Ltd Co, you could accept payments into that net of taxes but why you'd do that I don't know.

Umbrella will see you paying employers and employees NIC plus their fee so you could end up significantly worse off if the client don't make a specific agreement with them. I don't know how likely or feasible that is.

Agency payroll is probably the closest to a true payroll solution, assuming they are not charging you for the processing and it's part of their fee to the client and they're only deducting employee-type taxes, not the whole shebang like an umbrella would.


I would ask the agent for an illustration for their solution, then contact the shortlisted umbrellas for an illustration and take your pick.

[platforminc]

Thanks for the reply, just to ensure that i am not using the wrong terms. The options from the agency are as follows

1. PAYE with the agency
2. Umbrella with PAYE engagement
3. PSC with deductions (i.e. all NIC’s and PAYE tax to be deducted prior to payment to the PSC/Ltd company)

The alst option you described below, is that thesame as option 3 above ?

There is no benefit to be had from forming a new company.

If you have a Ltd Co, you could accept payments into that net of taxes but why you'd do that I don't know.

Umbrella will see you paying employers and employees NIC plus their fee so you could end up significantly worse off if the client don't make a specific agreement with them. I don't know how likely or feasible that is.

Agency payroll is probably the closest to a true payroll solution, assuming they are not charging you for the processing and it's part of their fee to the client and they're only deducting employee-type taxes, not the whole shebang like an umbrella would.


I would ask the agent for an illustration for their solution, then contact the shortlisted umbrellas for an illustration and take your pick.

[BR14]

option 2, is a standard umbrella? <automatically PAYE>, or some weird construct?
if standard, compare agency PAYE take home with umbrella take home, (they should give you approximate calculations), and pick the best one.
setting up a Ltd would be daft, really
IANAFA

[ladymuck]

Thanks for the reply, just to ensure that i am not using the wrong terms. The options from the agency are as follows

1. PAYE with the agency
2. Umbrella with PAYE engagement
3. PSC with deductions (i.e. all NIC’s and PAYE tax to be deducted prior to payment to the PSC/Ltd company)

The alst option you described below, is that thesame as option 3 above ?

No.

The first item where I mentioned Ltd Co was regarding #3.
The second item where I mentioned umbrella was regarding #2.
The third item where I mentioned agency was regarding #1.

BR14 gave the same final advice as me but bypassed the waffle.

[BR14]

No.

The first item where I mentioned Ltd Co was regarding #3.
The second item where I mentioned umbrella was regarding #2.
The third item where I mentioned agency was regarding #1.

BR14 gave the same final advice as me but bypassed the waffle.

i'm in systems engineering.
we leave the waffle to those more suited to it

i rest my case m'lud

[northernladuk]

so basically the clientco has put us all inside IR35 which is wrong, but i am not here to argue about what is right/wrong.

But this statement is potentially completely incorrect and the distinction is very important. By going those options does not necessarily mean you are inside. Some clients have just banned PSCs to avoid making a determination.

So.. Has you client...

A) Determined you are inside and given you options. The determination has potentially handed your ass to HMRC. Client has stated the gig you have been doing has been potentially inside all along.

B) Have refused to engage PSCs so no determination is made therefore HMRC has not comparison. They may see this is an admittance they are all inside but its an assumption so slightly less risky.

You've got to be absolutely sure which situation you are in.

[northernladuk]

But in answer to your question, the umbrella will have a scheme which you will join and you can dictate how much you want to put in up to your 40k limit.

When you leave you either let it run or move it to another SIPP.

Give Lucy at Clarity Umbrella a ring. She will tell you thst her scheme runs like thst. Only a few brollies offer this so if you've ygot a list to pick from then it might not be an option.

[Paralytic]

But in answer to your question, the umbrella will have a scheme which you will join and you can dictate how much you want to put in up to your 40k limit.

When you leave you either let it run or move it to another SIPP.

For completeness, the umbrella shouldnt limit your pension contributions to £40K per year. So long as they can pay you minimum wage, you should be able to pay in as much as you want, including any carry forward from previous years. It’s the individuals responsibility to work out if/when theyve used their unused allowances and avoid paying more tax.

[northernladuk]

For completeness, the umbrella shouldnt limit your pension contributions to £40K per year. So long as they can pay you minimum wage, you should be able to pay in as much as you want, including any carry forward from previous years. It’s the individuals responsibility to work out if/when theyve used their unused allowances and avoid paying more tax.

Probably but the only reason he'd be asking is to use his money most efficiently and that wouldn't be. But fair point if that's right.