Reply to: Company vs personal pension when under IR35

[Madb1lly]

I've only been a contractor less than two months, I think I can be excused not knowing all the lingo.

I'm not sure if "shouldn't need an accountant for this one" is sarcastic now! There's still plenty not clear to me on how to do the pension deduction and work out the deemed payment.

Anyway, thanks for the help on this topic.

Cheers

[northernladuk]

D&C = direction and control. SDC is the usual term - supervision, direction and control. HMRC terminology uses 'or' rather than 'and'.

https://www.gov.uk/government/public...ion-or-control

I'm struggling to understand how any contractor, bearing in mind we've been through the new legislation hitting three times in public sector and twice in the private, not knowing the basic acronyms that are the main pillars of IR35.

Shouldn't need an accountant for this one. It's your career so should be looking around for yourself. In the old days maybe because no one cared but over the last five years it's hard to get away from.

Have a look in the IR35 reform section. It's discussed regularly there along with a raft of other IR35 stuff that will be useful for you to know. There is an IR35 link to the right but that's mainly the old stuff. Still might be useful to understand what it is and comprises of.

Don't forget MoO - Mutuality of Obligation as well.

[ladymuck]

I'm not sure what D&C is, I can find the term used a lot on here but can't find a definition, probably another reason you'll all say I need to speak to an accountant pronto

D&C = direction and control. SDC is the usual term - supervision, direction and control. HMRC terminology uses 'or' rather than 'and'.

https://www.gov.uk/government/public...ion-or-control

[Fred Bloggs]

Oh, in that case, I agree with you. Certainly, the mere presence of the client overseas makes no difference, but the reality is that working for overseas clients generally has working practices that are strongly outside, including with regard to (lack of) Direction and Control (D&C). However, in your case, this would be a sham, so I agree, inside because both parties expect an employment type relationship.

Well, it took three pages, but eventually we got to the truth. Better late than never. I suppose.

[jamesbrown]

I don't think the client being overseas has any bearing on being inside IR35, it's the working practices and - honestly - I'm working as an employee. Full disclosure, I actually have a job offer from them and am going through the visa process, not that this should affect an IR35 assessment but it's the only reason I'm working for them as a contractor.

I'm not sure what D&C is, I can find the term used a lot on here but can't find a definition, probably another reason you'll all say I need to speak to an accountant pronto

Oh, in that case, I agree with you. Certainly, the mere presence of the client overseas makes no difference, but the reality is that working for overseas clients generally has working practices that are strongly outside, including with regard to (lack of) Direction and Control (D&C). However, in your case, this would be a sham, so I agree, inside because both parties expect an employment type relationship.

[Madb1lly]

Good clarification thanks that my ltd should pay into my pension on my behalf. I presume this is so the standard 20% tax relief is applied and then I can claim the higher rate back later in my tax return? Does the ltd paying into my personal pension mean they avoid employer's NI on those payments?

I've no idea if IR35 insurance is worth the paper it's written on, smacks of snake oil to me. Anyone got any experience of claiming on it?

I don't think the client being overseas has any bearing on being inside IR35, it's the working practices and - honestly - I'm working as an employee. Full disclosure, I actually have a job offer from them and am going through the visa process, not that this should affect an IR35 assessment but it's the only reason I'm working for them as a contractor.

I'm not sure what D&C is, I can find the term used a lot on here but can't find a definition, probably another reason you'll all say I need to speak to an accountant pronto

Maybe I've made an expensive mistake, I'll see if I can find an accountant willing to work for a reasonable fee to do an assessment and work out the pension thing. I don't want to get into a monthly payment with anyone on this as I don't plan for it to be a long-term thing.

[jamesbrown]

Agree with the others. It would be quite hard to be inside IR35 with an overseas client, but not impossible, so unless you've had your contract and working practices reviewed by a professional, I tend to think your working practices are more likely to be outside than in, but I note your position of responsibility with the client, which is a pointer towards being part and parcel of the client business, so there's that, alongside the lack of substitution. But a strong lack of D&C would be enough, unless you were an office holder at the client (which is definitively inside). Anyway, that's your call.

[Lance]

Hi all,

Yes it's inside IR35 even though the client is overseas. I decided this after reviewing the HMRC criteria, the main reason is because of the substitution criteria, they would not accept a substitute (although the contract doesn't prohibit it) mainly because they've hired me to lead and manage a team. They're a small company and the role is relatively senior in their organisation, I had an interview with the CEO, so despite how the contract is worded if HMRC rang them ask about working arrangements it would become apparent pretty quickly that my client wouldn't accept a substitute. I decided I don't want to say I'm outside IR35 and risk being investigated and having to defend something I already knew wouldn't hold up.

About the pension payments, the order of preference seems to be to max out my contributions to my personal pension in respect of higher rate tax relief, then my ltd can pay into the workplace pension and get relief CT and employer's NI.

Thanks for the help everyone. You're right jamesbrown, the next step is to work out the details with an accountant.

Cheers

You know that not being able to use a substitute isn’t the only criteria for determining IR35 status don’t you?
and you do know that you can buy insurance to cover you in the event of any problems?

it just seems to me that you’ve maybe made an expensive mistake here. Of course we don’t know all the details so there might be more that makes the role inside.

[Whitelime]

Hi all,

Yes it's inside IR35 even though the client is overseas. I decided this after reviewing the HMRC criteria, the main reason is because of the substitution criteria, they would not accept a substitute (although the contract doesn't prohibit it) mainly because they've hired me to lead and manage a team. They're a small company and the role is relatively senior in their organisation, I had an interview with the CEO, so despite how the contract is worded if HMRC rang them ask about working arrangements it would become apparent pretty quickly that my client wouldn't accept a substitute. I decided I don't want to say I'm outside IR35 and risk being investigated and having to defend something I already knew wouldn't hold up.

About the pension payments, the order of preference seems to be to max out my contributions to my personal pension in respect of higher rate tax relief, then my ltd can pay into the workplace pension and get relief CT and employer's NI.

Thanks for the help everyone. You're right jamesbrown, the next step is to work out the details with an accountant.

Cheers

IR35 insurance?

[eek]

Hi all,

Yes it's inside IR35 even though the client is overseas. I decided this after reviewing the HMRC criteria, the main reason is because of the substitution criteria, they would not accept a substitute (although the contract doesn't prohibit it) mainly because they've hired me to lead and manage a team. They're a small company and the role is relatively senior in their organisation, I had an interview with the CEO, so despite how the contract is worded if HMRC rang them ask about working arrangements it would become apparent pretty quickly that my client wouldn't accept a substitute. I decided I don't want to say I'm outside IR35 and risk being investigated and having to defend something I already knew wouldn't hold up.

About the pension payments, the order of preference seems to be to max out my contributions to my personal pension in respect of higher rate tax relief, then my ltd can pay into the workplace pension and get relief CT and employer's NI.

Thanks for the help everyone. You're right jamesbrown, the next step is to work out the details with an accountant.

Cheers

Nope - as you are using a limited company - the best approach is a £40,000 paid direct from your company into your pension fund.

And yes you clearly do need an accountant based on the above.

[Madb1lly]

Hi all,

Yes it's inside IR35 even though the client is overseas. I decided this after reviewing the HMRC criteria, the main reason is because of the substitution criteria, they would not accept a substitute (although the contract doesn't prohibit it) mainly because they've hired me to lead and manage a team. They're a small company and the role is relatively senior in their organisation, I had an interview with the CEO, so despite how the contract is worded if HMRC rang them ask about working arrangements it would become apparent pretty quickly that my client wouldn't accept a substitute. I decided I don't want to say I'm outside IR35 and risk being investigated and having to defend something I already knew wouldn't hold up.

About the pension payments, the order of preference seems to be to max out my contributions to my personal pension in respect of higher rate tax relief, then my ltd can pay into the workplace pension and get relief CT and employer's NI.

Thanks for the help everyone. You're right jamesbrown, the next step is to work out the details with an accountant.

Cheers

[ladymuck]

I think they're talking about the situation with the OP. The 5% allowance still exists for a small client or a fully overseas supply chain ("old IR35") because the responsibility to determine status and apply deemed payments remains with YourCo, which is what that allowance is meant to cover.

Ah... comprende.

[jamesbrown]

Er... no.

You're not allowed to claim any expenses for an inside role, unless they are ones the client is actually going to reimburse you for.

You can't rob yourself of something you can't claim.

I think they're talking about the situation with the OP. The 5% allowance still exists for a small client or a fully overseas supply chain ("old IR35") because the responsibility to determine status and apply deemed payments remains with YourCo, which is what that allowance is meant to cover.

[northernladuk]

So by using an Umbrella Company for inside IR35 roles, all you're actually doing is robbing yourself of 5% expenses?

Only if you meet the criteria. The exemption has been removed in most cases.

[ladymuck]

So by using an Umbrella Company for inside IR35 roles, all you're actually doing is robbing yourself of 5% expenses?

Er... no.

You're not allowed to claim any expenses for an inside role, unless they are ones the client is actually going to reimburse you for.

You can't rob yourself of something you can't claim.