First contract role in the UK: confusion over employer's NI

[mudskipper]

Say again? Have you sun stroke ?


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If you are engaged via an umbrella, then you are an employee of the umbrella. So IR35 does not apply as you are an employee. However, if the reason you're engaged via the brolly is because the role was assessed as "inside", it gets a bit confusing...

[GhostofTarbera]

If you are using a proper Umbrella company IR35 can never apply as you need to have 5% of the shares in the company for it to apply and it is irrelevant as you take all your income as PAYE anyway. The only place it is semi relevant is to do with expenses and the D&C side of things but again that isn't that common these days.

Martin
Contratax Ltd

Say again? Have you sun stroke ?


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[ContrataxLtd]

Yep but IR35 is based on the role. The umbrella is just the method you get paid. You can be via a brolly on an inside or outside gig. IR35 still applies.

If you are using a proper Umbrella company IR35 can never apply as you need to have 5% of the shares in the company for it to apply and it is irrelevant as you take all your income as PAYE anyway. The only place it is semi relevant is to do with expenses and the D&C side of things but again that isn't that common these days.

Martin
Contratax Ltd

[northernladuk]

I might be wrong, but as I understand it.....

From the IR35 link in the in section 5 of the link you posted:

"The intermediary can be:

a worker’s own limited company - known as a personal service company (PSC)
a partnership
another individual"

IR35 doesn't apply as you are using an Umbrella company, and are an employee of them for the contract period.

Yep but IR35 is based on the role. The umbrella is just the method you get paid. You can be via a brolly on an inside or outside gig. IR35 still applies.

[jmo21]

I might be wrong, but as I understand it.....

From the IR35 link in the in section 5 of the link you posted:

"The intermediary can be:

a worker’s own limited company - known as a personal service company (PSC)
a partnership
another individual"

IR35 doesn't apply as you are using an Umbrella company, and are an employee of them for the contract period.

[TazCaz]

I'm hoping one of the umbrella company reps posts up to clarify the situation but I have a hunch it all gets passed on and that's why rates were being inflated by about 30% in some areas.

It's a harsh lesson to learn. Is the contract all signed and sealed or is there room for negotiation?

Thanks ladymuck - would be keen to hear from one of the agency reps, too.

And yes, a very harsh lesson to learn - the recruitment agency understood that I was new to the UK and didn't know about umbrella companies or things like IR35 when she came back to offer me the job after the interview. I'd accepted before I was aware of what this meant in terms of all the extra costs and did go back to her and say that I'd quoted my sole trader rate unaware of the extra deductions and could I renegotiate the rate but was refused, though no contract has been signed. I also have to fork out for an Australian police check. Perhaps a misunderstanding, but I do see it as a little underhanded.

[ladymuck]

I'm hoping one of the umbrella company reps posts up to clarify the situation but I have a hunch it all gets passed on and that's why rates were being inflated by about 30% in some areas.

It's a harsh lesson to learn. Is the contract all signed and sealed or is there room for negotiation?

[TazCaz]

I thought an inside determination in the public sector meant that 'someone else' paid the EErs NI but maybe that was if you had a LtdCo rather than used an umbrella.

Sadly, the arrangement has always been as described in the posts above. You get stung for the whole lot. You should be able to opt out of the pension though. You can't opt out of the apprenticeship levy.

That's how I interpreted the legislation linked in my post too, ladymuck. To whom does that legislation apply to then I wonder?

I get that paying employer's NI, apprenticeship levy etc are just part of the deal, just seems a very unfair situation. I suppose if I'd known about it prior to submitting my day rate I would have factored it in, but I just submitted based on my usual sole-trader rate.

I will definitely be opting out of pension. I have done this in both of the short term (on payroll) jobs I'm had since being here as there's a good chance I'll be heading back to Australia in a few years so would prefer that money now rather than leave tied up here in a pension or transfer it to Australia and lose 25%.

[ladymuck]

I thought an inside determination in the public sector meant that 'someone else' paid the EErs NI but maybe that was if you had a LtdCo rather than used an umbrella.

Sadly, the arrangement has always been as described in the posts above. You get stung for the whole lot. You should be able to opt out of the pension though. You can't opt out of the apprenticeship levy.

[GhostofTarbera]

First contract role in the UK: confusion over employer's NI

The umbrella company becomes your employer, and everything comes out of your day rate.

Exactly this

The umbrella company can’t pay your employers NI as it gets no cut from the end client

Ohh and all your expenses come out of your net pay

And they will auto enroll you into a pension


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[jmo21]

The umbrella company becomes your employer, and everything comes out of your day rate.

[TazCaz]

Hello,

I have been offered by an agency a Scottish public sector contract inside IR35. I am new to the UK and had never heard of inside or outside IR35, or umbrella companies, until I was offered this role. I was simply asked my day rate (based on my experience as a sole trader responsible for my own tax etc in Australia), and they accepted this amount.

I have, of course, since found out that from this day rate, as well as my own tax and insurance payments, the umbrella company I have to choose from their list of six, will take their admin fee and also I will be liable for the employer's NI. The fee makes sense to me, the NI doesn't.

I have been reading a lot on these forums and elsewhere, and while I see in some cases people are saying paying employer's NI is just part and parcel of using an umbrella company, others are referring to legislation that means the agency should be covering this.

I apologise if I am misunderstanding but, as I said, I have been hurriedly trying to play catch up since being offered and accepting this role. While it was explained to me that I would have to use an umbrella company, there was no mention I would need to pay employer's NI.

Everyone on this forum seems very clued in to the process so if anyone can offer some advice, it would be most appreciated.

Thanks in advance!