Reply to: Agency charging 12.5% - Apprenticeship Levy

[WTFH]

I am Owner, Director of company as you say 'the only taxes for which your company is liable are VAT (if registered and must be added on to invoices), income tax and NI if inside IR35' then surely I should not be paying Employers NIC ? According to my remittance advice slips the agency has charged it as in Post 14 (12.5% Deduction -1,290.00)

NIC is not a tax.
Employer NIC is not a tax
Employee NIC is not a tax
Companies should be paying Employer NICs

Tell me, have you actually read anything that has been written on this thread or are you waiting for someone to tell you that you are due a massive refund or a court case to get some money back?

Read post 10: https://forums.contractoruk.com/acco...ml#post2567072
Then read post 12: https://forums.contractoruk.com/acco...ml#post2567078
Then post 16: https://forums.contractoruk.com/acco...ml#post2567099
Then post 18: https://forums.contractoruk.com/acco...ml#post2567143


...and then tell us what you'd like us to tell you, because it appears you're not wanting to understand what's been told to you.

[OrangeJuice]

WTFH is quite right, and just in case some agency in the future tries to con you into paying app levy, bear in mind the following:

Even if you're inside IR35, you are NOT an employee of either the agency or the end client. You might be 'deemed' by HMRC to be a 'disguised employee' (a notional concept), but that is not the same as being an employee. If you're a contractor and owner and director of a company then you are running a business and you are charging the agency a professional fee for your services to the end client. As such, the only taxes for which your company is liable are VAT (if registered and must be added on to invoices), income tax and NI if inside IR35, and corporation tax and dividend tax if outside IR35. If it's one of these public sector inside IR35 fiascos then admittedly they take tax off at source, but it should only be the correct taxes. App levy is not one of them!!

I am Owner, Director of company as you say 'the only taxes for which your company is liable are VAT (if registered and must be added on to invoices), income tax and NI if inside IR35' then surely I should not be paying Employers NIC ? According to my remittance advice slips the agency has charged it as in Post 14 (12.5% Deduction -1,290.00)

[rogerthedodger]

WTFH is quite right, and just in case some agency in the future tries to con you into paying app levy, bear in mind the following:

Even if you're inside IR35, you are NOT an employee of either the agency or the end client. You might be 'deemed' by HMRC to be a 'disguised employee' (a notional concept), but that is not the same as being an employee. If you're a contractor and owner and director of a company then you are running a business and you are charging the agency a professional fee for your services to the end client. As such, the only taxes for which your company is liable are VAT (if registered and must be added on to invoices), income tax and NI if inside IR35, and corporation tax and dividend tax if outside IR35. If it's one of these public sector inside IR35 fiascos then admittedly they take tax off at source, but it should only be the correct taxes. App levy is not one of them!!

[moggy]

@madame SasGuru and moggy,

You are correct, I didn't realise Employers NIC would be deducted from the rate. So is this normal and above board ?

Yes perfectly normal unfortunately and i would guess not what the agency would prefer to be doing, i.e. allowing you to use your own Ltd Company.

[lucyclarityumbrella]

We need Lucy. She loves talking about Employers NIC.

Awwww feelign the contractor love!

OK let me explain why it is not straight forward to work out the Employers NI!

Employers NI is calculated on the taxable salary, which for a contractor you do not know as you only have a "contract rate" at the point you take on the assignment. So without turning it into a complete snore fest for you, there is some excel wizardry pokery that goes on in the form of a reverse calculation until the 13.8% is calculated based on the salary, not the contract rate!

What they deduct will also be based on the contract you have with the company - you mention "agency" which if they operate straight forward PAYE you would see difference deductions to the umbrella route.

[OrangeJuice]

Well it shouldn’t be being deducted as an inside ir35 contract should be being advertised at the rate after employer ni has been deducted.

The unions have been pointing this out for years and Dave Chaplin has ran with it. The link on my previous link is towards the lawyers about to kick off 1000+ employment tribunals for illegal deductions now the initial cases have been won

@madame SasGuru and moggy,

You are correct, I didn't realise Employers NIC would be deducted from the rate. So is this normal and above board ?

[BlasterBates]

All above board:

https://www.contractoruk.com/success...ntractors.html

The agency is right to charge the apprenticeship levy as part of the deductions but they should raise the rate to compensate, indeed they did do this as you say although they mentioned this was because of NI.

I don't think there's anything really to quibble about.

[moggy]

Well it shouldn’t be being deducted as an inside ir35 contract should be being advertised at the rate after employer ni has been deducted.

The unions have been pointing this out for years and Dave Chaplin has ran with it. The link on my previous link is towards the lawyers about to kick off 1000+ employment tribunals for illegal deductions now the initial cases have been won

Its most likely the unions that have caused all the confusion over ir35 in the first place. If the OP was using an umbrella the rate advertised would need to be the higher rate and not the net rate. Judging by the lack of understanding from the OP my guess is he was told the rate and the fact that it was inside ir35..

[madame SasGuru]

So I think the OP has fallen into the trap of forgetting that Employers' NIC needs to be deducted from the rate.

Well it shouldn’t be being deducted as an inside ir35 contract should be being advertised at the rate after employer ni has been deducted.

The unions have been pointing this out for years and Dave Chaplin has ran with it. The link on my previous link is towards the lawyers about to kick off 1000+ employment tribunals for illegal deductions now the initial cases have been won

[WTFH]

Agency charging 12.5% - Apprenticeship Levy

Except ErNICs are 13.8%...?

Yes, they are, above the threshold. The current threshold is £8,424, so on an equivalent of £80k a year, 13.8% above £8,424 is roughly 12.5% overall

[Old Greg]

What I dont understand is why the '12.5% Deduction -1,290.00 ?

Are they charging a 12.5% fee?

[malvolio]

Have you ignored everything I've said?

They told you it was Employers NICs.

Please read posts 10, 11, 12 & 13

https://forums.contractoruk.com/acco...ml#post2567072

Except ErNICs are 13.8%...?

Anyway, I would be asking for breakdown of "deductions". It could be the OP's contribution to the agent's Jaguar for all he knows...

[WTFH]

What I dont understand is why the '12.5% Deduction -1,290.00 ?

Have you ignored everything I've said?

They told you it was Employers NICs.

Please read posts 10, 11, 12 & 13

https://forums.contractoruk.com/acco...ml#post2567072

[OrangeJuice]

What I dont understand is why the '12.5% Deduction -1,290.00 ?

[WTFH]

Below is a copy of one of the remittance notes, does the above tally ?

Hrs/Days Type Rate (£) Amount (£)
4.00 Daily Standard Rate 430.00 1,720.00
5.00 Daily Standard Rate 430.00 2,150.00
5.00 Daily Standard Rate 430.00 2,150.00
5.00 Daily Standard Rate 430.00 2,150.00
5.00 Daily Standard Rate 430.00 2,150.00
PAYE Tax -2,692.46
NIC Employee -474.00
12.5% Deduction -1,290.00


Total before VAT (£) 5,863.54

Back of a fag packet, yes, that looks about right. Tax, NICs and other deductions are generally based on an annual salary which is then divided down by 12. When someone quotes a daily rate, then the annual salary is not fixed. Also, without knowing your tax code, if you are repaying any student loans, your NIC class, etc, then any calculation you or I do is based on assumptions.

As I said above, perhaps ask them to provide you with a breakdown, do not tell them various things you think you want to hear, just ask them to give you a breakdown of your pay.